What Is a General Partner (GP)?
In a private equity, venture capital, or hedge fund structured as a limited partnership, the general partner is the party that runs the fund. The GP sources deals, performs due diligence, decides what to buy and sell, manages portfolio companies, and handles reporting to investors. Legally, the GP has unlimited liability for the partnership's obligations, though in practice firms use corporate structures to contain that exposure.
When people say a firm like Blackstone or Sequoia "manages" a fund, the firm is acting as the GP. The investors who supply most of the capital, such as pension funds and endowments, are the limited partners, and they have no role in day-to-day investment decisions.
How the GP Is Paid and Aligned
The GP earns a management fee, typically 2% of committed capital, to run operations, plus carried interest, typically 20% of profits above a hurdle rate. This 2-and-20 structure means the GP's largest payoff comes only when limited partners make money, which is the core alignment mechanism of private markets.
GPs are also expected to invest their own money alongside LPs, known as the GP commitment, often 1% to 5% of the fund size. A meaningful GP commitment signals that the manager has real skin in the game, and LPs scrutinize it closely during fundraising.
Example
Consider a firm raising a $500 million buyout fund. The GP entity commits $10 million of the partners' own capital (2%), collects a 2% management fee of $10 million per year during the investment period, and calls capital from LPs as deals are signed. If the fund eventually returns $1 billion, the $500 million profit is split 80/20, and the GP earns $100 million of carry on top of its fees and the return on its own commitment.
That carry pool is then allocated internally among the firm's partners, principals, and sometimes associates, which is why seniority at a fund is often described in terms of carry points.
Why It Matters
The GP/LP structure is the legal and economic backbone of the entire private markets industry, and understanding who does what is essential context for any buy-side role. When you join a private equity firm as an associate, you are joining the GP side of the relationship.
Interviewers frequently ask candidates to explain the difference between a GP and an LP and to walk through how the GP gets paid, so a crisp answer covering fees, carry, and the GP commitment demonstrates real fluency with fund mechanics.
