Full Definition
A limited partner (LP) is an investor who commits capital to a venture capital or private equity fund but does not participate in the fund's daily management or investment decisions. LPs provide the majority of capital in a fund and have limited liability — their maximum loss is their committed capital.
Types of LPs
- Pension Funds: CalPERS, teacher retirement systems
- University Endowments: Harvard, Yale, Stanford endowments
- Foundation/Nonprofits: Ford Foundation, Gates Foundation
- Family Offices: Wealth management for ultra-high-net-worth families
- Sovereign Wealth Funds: Government investment funds
- Fund of Funds: Funds that invest in other VC/PE funds
- High-Net-Worth Individuals: Wealthy individual investors
Real-World Example
A university endowment commits $50M as an LP to a $500M venture fund, representing 10% of the fund's total capital.
Related Terms
The managing partner(s) of a venture fund who make investment decisions and manage the portfolio.
A form of private equity financing provided by firms to startups with high growth potential.
The share of investment profits (typically 20%) that fund managers receive as performance compensation.
An investor who contributes capital to a venture fund but does not participate in day-to-day management.
Investment firms that acquire stakes in or buy out mature companies to improve operations and resell at a profit.
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