A limited partner (LP) is an investor in a private fund — typically structured as a limited partnership — who provides capital but does not participate in the fund's investment decisions or daily operations. LPs include institutional investors (pension funds, endowments, insurance companies, sovereign wealth funds), family offices, funds of funds, and qualified individual investors.
LP Rights and Obligations
LPs commit capital to a fund and are obligated to fund capital calls when issued by the GP. In return, LPs receive priority distributions (return of capital, preferred return) and a share of profits per the waterfall terms. LPs typically have limited governance rights — they may vote on key-person events, fund extensions, or removal of the GP, but they do not make investment decisions.
LP Transparency and Reporting
Modern LPs increasingly demand real-time portfolio transparency. According to industry surveys, 67% of LPs cite transparency as a top criterion when selecting fund managers. This has driven adoption of investor portals that give LPs 24/7 access to capital account balances, NAV updates, distribution history, tax documents (K-1s), and fund-level performance metrics (IRR, TVPI, DPI).