--- title: "Limited Partner (LP) | Altss Glossary" description: "A limited partner (LP) is a member of a limited partnership whose liability is limited to its agreed contribution and who does not manage the partnership;…" canonical: "https://altss.com/glossary/limited-partner" --- Glossary · Person / role # Limited Partner (LP) Also called: LP investor · fund investor "LP" also abbreviates limited partnership, the fund vehicle itself. A limited partner (LP) is a member of a limited partnership whose liability is limited to its agreed contribution and who does not manage the partnership; in private markets the term is used for any investor in a private fund. Publisher: Altss LLC Published 2025-12-26 Content modified 2026-10-02 ALTSS-STRUCT-003 Limited partners are the investors in a private fund. They commit capital, receive most of the profits and can lose at most what they agreed to contribute. They do not run the fund, but they have rights under the partnership agreement and side letters, and large LPs often sit on the advisory committee. ## Legal definition and market usage In law, a limited partner is a partner in a [limited partnership](https://altss.com/glossary/limited-partnership) with limited liability and no management authority; that page sets out how LPs stand beside the fund, its general partner and the sponsor's management company. In market usage "LP" means any investor in a private fund, even where the vehicle is a limited liability company (LLC), whose investors are members, a company (shareholders) or a Luxembourg société d'investissement à capital variable (SICAV), whose investors are shareholders. Investors in registered funds, business development companies (BDCs) and interval funds are shareholders, not LPs. ## Who limited partners are Typical LPs are pension funds, endowments, foundations, sovereign wealth funds, insurance general accounts, family offices, funds of funds and, through feeder funds, high-net-worth individuals. LP is a role, not a type of institution: the same pension fund is an LP in one fund and a direct co-investor in another. ## Eligibility US private fund interests are commonly offered under Regulation D, so LPs are usually [accredited investors](https://altss.com/glossary/accredited-investor) as defined in Rule 501(a); a fund relying on Investment Company Act section 3(c)(7) is owned exclusively by [qualified purchasers](https://altss.com/glossary/qualified-purchaser) (persons who were qualified purchasers when they acquired their interests). If an adviser registered or required to be registered with the Securities and Exchange Commission charges a performance-based fee to a 3(c)(1) fund, each investor charged that fee must generally be a [qualified client](https://altss.com/glossary/qualified-client): under the SEC order effective 29 June 2026 (Release IA-6961) the dollar tests are at least $1.4 million under the adviser's management immediately after entering the contract, or a net worth (jointly with a spouse, for a natural person) of more than $2.7 million excluding the primary residence; qualified purchasers also qualify. In the EU, alternative investment funds (AIFs) are marketed mainly to professional investors, which the AIFM Directive, as amended in 2024, defines by reference to the professional client category in Annex II of MiFID II (Directive 2014/65/EU). ## Rights An LP's rights come from the limited partnership agreement (LPA), its [side letter](https://altss.com/glossary/side-letter) and the statute. Common rights: economic interest in the fund as shown in its capital account; information rights; voting on amendments, extensions and GP removal; [LPAC](https://altss.com/glossary/lpac) membership for larger investors; excuse and exclusion from specific investments for legal or policy reasons; most favoured nation (MFN) elections; and transfer of its interest, normally with GP consent. ## Obligations and risks The main obligation is to fund [capital calls](https://altss.com/glossary/capital-call) up to the commitment; failure triggers defaulting LP remedies. LPs may also have to return distributions under an LP giveback to fund indemnities. LP status also affects the fund: under the US Department of Labor plan-asset regulation, once benefit plan investors hold 25% or more of the value of any class of equity interests, the fund's assets can become [plan assets](https://altss.com/glossary/plan-assets) under the Employee Retirement Income Security Act (ERISA) unless an exception applies (29 CFR 2510.3-101(f)(1)). ## Not the same as - [General Partner (GP)](https://altss.com/glossary/general-partner): The general partner manages the fund and has unlimited liability; limited partners invest and have limited liability. - [Institutional Investor](https://altss.com/glossary/institutional-investors): Institutional investor describes what an organisation is; limited partner describes its role in a specific fund. - [Co-Investment](https://altss.com/glossary/co-investment): A co-investor holds a stake in a specific company, directly or through a special purpose vehicle (SPV); it may also be an LP in the sponsor's fund, but the roles are separate. ## How it is classified - Use "limited partner" for the investor role in a specific fund; classify the investing organisation separately by allocator type. - Record a feeder or fund of funds as the LP of the main fund; record its own investors as LPs of the feeder. ## Common mistakes - Listing "limited partner" as an allocator type alongside pensions and endowments. It is a role those allocators play. - Calling investors in interval funds, BDCs or UCITS "LPs". They are shareholders or unitholders. - Assuming LP limited liability means LPs can never be asked to return money; LP giveback provisions and statutory rules, such as Delaware's limit on distributions (6 Del. C. 17-607), can require it. ## Edge cases - A GP affiliate investing through the fund is also a limited partner for that interest. - A feeder fund is a single LP in the main fund even though it represents many underlying investors; look-through rules can apply. Under Investment Company Act section 3(c)(1)(A), a feeder that owns 10% or more of the main fund's voting securities and is (or but for 3(c)(1) or 3(c)(7) would be) an investment company is counted through to its own holders; for ERISA, an entity whose assets include plan assets is itself a benefit plan investor (29 CFR 2510.3-101(f)(2)). ## Sources 1. [Loi modifiée du 10 août 1915 concernant les sociétés commerciales - Art. 320-1 (société en commandite spéciale, SCSp)](https://data.legilux.public.lu/filestore/eli/etat/leg/loi/1915/08/10/n1/consolide/20250302/fr/html/eli-etat-leg-loi-1915-08-10-n1-consolide-20250302-fr-html.html). Grand Duchy of Luxembourg, Legilux (consolidated version applicable 2 March 2025), SCSp introduced by Law of 12 July 2013; now Art. 320-1 (last amended by Law of 7 August 2023). Status: In force (checked 2026-10-01). Art. 320-1(1) (consolidated text of 2 March 2025) — supports: Limited partners commit only a specified contribution (une mise determinee) 2. [17 CFR 230.501 - Definitions and terms used in Regulation D (accredited investor)](https://www.law.cornell.edu/cfr/text/17/230.501). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2025-02-18 (technical, 90 FR 9684); last substantive amendment effective 2020-12-08 (85 FR 64234). Status: in force (checked 2026-10-01). 17 CFR 230.501(a) (introductory text) — supports: Accredited investor definition used in Regulation D 3. [15 U.S.C. 80a-2 - Definitions (Investment Company Act sec. 2, incl. 2(a)(48) BDC and 2(a)(51) qualified purchaser)](https://www.law.cornell.edu/uscode/text/15/80a-2). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 2(a)(51)(A) — supports: Qualified purchaser definition 4. [Order Approving Adjustment for Inflation of the Dollar Amount Tests in Rule 205-3 under the Investment Advisers Act of 1940, Release No. IA-6961](https://www.sec.gov/files/rules/ia/2026/ia-6961.pdf). U.S. Securities and Exchange Commission, Issued 2026-04-28; effective 2026-06-29. Status: in force (checked 2026-10-01). Order (April 28, 2026), Section III (effective 29 June 2026) and ordering paragraphs — supports: Qualified client: at least $1,400,000 under management (rule 205-3(d)(1)(i)); net worth of more than $2,700,000 (rule 205-3(d)(1)(ii)(A)) 5. [29 CFR 2510.3-101 - Definition of "plan assets" - plan investments (plan asset regulation)](https://www.law.cornell.edu/cfr/text/29/2510.3-101). U.S. Department of Labor, Employee Benefits Security Administration (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; no amendment since eCFR baseline. Status: in force (checked 2026-10-01). 29 CFR 2510.3-101(a)(2), (f)(1), (f)(2)(iii) — supports: 25% of the value of any class of equity interests held by benefit plan investors is significant participation; an entity whose underlying assets include plan assets is a benefit plan investor 6. [Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD)](https://eur-lex.europa.eu/eli/dir/2011/61/oj/eng). European Parliament and Council, Official Journal of the EU, L 174, 1.7.2011, Adopted 8 June 2011; transposition by 22 July 2013. Status: In force; amended by Directive (EU) 2024/927 (AIFMD II) (checked 2026-10-01). Art. 4(1)(ag) (original text, referring to Directive 2004/39/EC) — supports: Professional investor defined by reference to MiFID Annex II 7. [15 U.S.C. 80b-5 - Investment advisory contracts (Advisers Act s.205)](https://www.law.cornell.edu/uscode/text/15/80b-5). U.S. Congress (US Code via LII), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 205(a)(1) — supports: Performance-fee restriction applies to advisers registered or required to be registered with the SEC 8. [17 CFR 275.205-3 - Exemption from the compensation prohibition of section 205(a)(1) for investment advisers (qualified client)](https://www.law.cornell.edu/cfr/text/17/275.205-3). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 86 FR 62475 (2021-11-10). Status: in force (checked 2026-10-01). 17 CFR 275.205-3(a), (b), (d)(1)(ii)(A), (d)(3) — supports: Exemption for qualified clients; each equity owner of a 3(c)(1) fund charged a performance fee is treated as a client; primary residence excluded from net worth 9. [Directive (EU) 2024/927 amending Directives 2011/61/EU and 2009/65/EC (AIFMD II)](https://eur-lex.europa.eu/eli/dir/2024/927/oj/eng). European Parliament and Council, Official Journal of the EU, L series, 26.3.2024, Adopted 13 March 2024; Member States to adopt and apply measures by 16 April 2026 (some reporting provisions later). Status: In force; transposition deadline passed 16 April 2026; national transposition status varies by Member State (checked 2026-10-01). Art. 1(1)(a) (replacing Directive 2011/61/EU Art. 4(1)(ag)) — supports: Professional investor defined by reference to Annex II of MiFID II (Directive 2014/65/EU) 10. [15 U.S.C. 80a-3 - Definition of investment company (Investment Company Act sec. 3, incl. 3(c)(1) and 3(c)(7))](https://www.law.cornell.edu/uscode/text/15/80a-3). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 3(c)(7)(A); Sec. 3(c)(1)(A) — supports: 3(c)(7) issuer owned exclusively by persons who were qualified purchasers at acquisition; 3(c)(1)(A) look-through for a 10% holder that is or would be an investment company 11. [6 Del. C. s.17-607 - Limitations on distribution (DRULPA)](https://delcode.delaware.gov/title6/c017/sc06/index.html). State of Delaware (Delaware Code Online), Delaware Code Online, Title 6 ch. 17 (accessed 2026-10-01). Status: in force (checked 2026-10-01). 6 Del. C. Sec. 17-607(a)-(c) — supports: Limited partner who knowingly receives a prohibited distribution is liable to the partnership for it ## Related terms 8 terms - [General Partner (GP)](https://altss.com/glossary/general-partner) - [Capital Commitment](https://altss.com/glossary/capital-commitment) - [Limited Partner Advisory Committee (LPAC)](https://altss.com/glossary/lpac) - [Side Letter](https://altss.com/glossary/side-letter) - [Accredited Investor](https://altss.com/glossary/accredited-investor) - [Qualified Purchaser (QP)](https://altss.com/glossary/qualified-purchaser) - [Plan Assets](https://altss.com/glossary/plan-assets) - [Limited Partnership (LP)](https://altss.com/glossary/limited-partnership) ## Referenced by 3 terms - [Institutional Investor](https://altss.com/glossary/institutional-investors) - [Private Capital (Private Markets)](https://altss.com/glossary/private-capital) - [Private Equity (PE)](https://altss.com/glossary/private-equity) ## Concept record Concept ID ALTSS-STRUCT-003 Classification Person / role · Allocator type Topics Fund structures · Institutional investors Version 2.0.0 Last reviewed 2026-10-02 Structured data [JSON](https://altss.com/reference/concepts/limited-partner.json) Source check Legal and regulatory statements checked against the cited primary sources on 2026-10-02 ([how](https://altss.com/methodology)). General information, not advice. ## Canonical URL https://altss.com/glossary/limited-partner