GP (General Partner)
Also known as General Partner, GP, Fund Manager, Managing Partner
A GP (general partner) is the managing entity of a venture or private equity fund. The GP makes investment decisions, owns the management company, and bears unlimited liability for the partnership's obligations in exchange for a management fee and carried interest.
In depth
The GP sits at the center of every fund mechanic an LP cares about. Legally, the GP is a partner with unlimited liability for the partnership's obligations, almost always structured itself as an LLC so the human partners do not carry personal exposure beyond their own commitment. Economically, the GP runs the management company that employs the investment team and collects the management fee, while the carried-interest entity (often a parallel LLC) holds the right to a share of fund profits.
The GP role is distinct from the management company role even though both are run by the same people. The fund pays management fees to the management company. The fund pays carried interest to the GP entity. This separation matters for tax (carry as long-term capital gains) and for liability ring-fencing.
Why it matters
LPs underwrite GPs, not funds. Track record, attribution, partnership stability, and the GP commitment percentage tell an LP more about expected returns than any deck slide. A weak GP commitment (under 1%) is a structural red flag and an active negotiation point in every fundraise. The ILPA Principles 3.0 push GPs toward higher commitments paid in cash rather than waived management fees, on the view that real skin in the game produces better LP outcomes.
Worked example
A $200M Fund IV with a 2% management fee and 20% carry:
| Stream | Annual / total | Goes to |
|---|---|---|
| Management fee (yr 1-5) | $4M/year ($20M cum) | Management company |
| GP commitment | $4M (2% of fund) | GP entity capital account |
| Carry (assume 3x gross) | ~$80M | Carry entity, post hurdle |
If the fund returns 3x gross, LPs receive their $200M back plus the 8% preferred return before the GP catches up and starts splitting profits 80/20. The GP's carry on a successful $200M fund can dwarf a decade of management fees, which is the point: fee revenue keeps the lights on, carry is the reason to do the job.
Frequently asked
What does the GP actually do day to day?
The GP sources deals, runs diligence, negotiates terms, sits on boards, signs subscription documents, manages valuations, runs LP reporting, and issues capital calls and distributions. The economics flow through a separate management company that employs the team.
How does the GP make money?
Two streams: a management fee (typically 2% of committed capital during the investment period, stepping down later) and carried interest (typically 20% of profits after LPs are returned capital plus an 8% preferred return). Carry is the main wealth driver.
Does the GP put its own money into the fund?
Yes. A GP commitment of 1% to 5% of fund size is standard and is what LPs negotiate hardest on. The commitment aligns the GP with LP outcomes and is required for the GP to receive partnership tax treatment on carry.
What does unlimited liability mean for a venture GP?
In a classic limited partnership, the GP is personally on the hook for partnership debts. In practice, modern funds use a GP entity that is itself an LLC, capping the human partners' liability. LPs remain liable only up to their commitment.