GP Commitment
GP commitment is the amount of capital the GP and related principals invest into their own fund.
Allocator relevance: A primary alignment signal—meaningful GP capital at risk strengthens incentive alignment with LP outcomes.
Expanded Definition
GP commitment reduces moral hazard by ensuring the GP experiences the same return profile and downside as LPs. The strength of the signal depends on size relative to GP net worth and fee economics. A “headline” number can be misleading if it is financed via fee waivers, loans, or recycled carry.
Allocators evaluate the form of commitment (cash vs waiver), who is committing (firm vs individuals), and whether it is locked under the same terms as LP capital.
How It Works in Practice
GP commitment is disclosed in fund documents and often discussed during fundraising. Some managers commit via management fee waivers, and some LPs negotiate transparency on financing arrangements through side letters.
Decision Authority and Governance
Governance focuses on disclosure quality and whether conflicts arise from financing structures. Strong alignment frameworks pair GP commitment with key person provisions and clear conflict policies.
Common Misconceptions
- Any GP commitment is sufficient.
- A large commitment always means high alignment.
- Fee waivers are equivalent to cash.
Key Takeaways
- Relative magnitude and structure matter.
- Transparency is critical—avoid “alignment theater.”
- Pair with other alignment controls for full picture.