Most PE firms are structured as limited partnerships, where the fund manager is the general partner (GP) and the fund’s investors are limited partners (LP). The GP has management control over the fund and is jointly liable for all debts. The LPs have limited liability; they do not risk more than the amount of their investment in the fund.
Two core functions of the GP are: (1) to raise funds and (2) To manage investments
The following figure shows the funding stages for a private equity firm.
The most significant economic terms are:
The most significant corporate governance terms are:
The value of a fund is based on NAV. The fund’s assets are valued by GPs in the following ways:
Due diligence is important because: