Limited Partnership Agreement (LPA)
An LPA is the primary legal contract governing a private fund’s structure, economics, and rules between the GP and LPs.
Allocator relevance: Defines the real deal: fees, carry, waterfall, governance rights, conflicts, and what the GP is allowed to do.
Expanded Definition
The LPA outlines fund term, investment period, permissible investments, borrowing, fee and expense definitions, valuation policy, reporting obligations, key person and removal provisions, and LP voting rights. It is the foundation for operational and legal diligence and determines how disputes and edge cases are handled.
Allocators treat the LPA as a risk document, not just a legal formality.
How It Works in Practice
LPs review the LPA during fundraising, negotiate changes (often via side letters), then sign subscription agreements to join the fund. The LPA governs ongoing operations and LP protections throughout the fund life.
Decision Authority and Governance
Governance mechanisms (LPAC, votes, approvals) are defined in the LPA. Strong LPAs create clear checks on conflicts, valuation, borrowing, and continuation vehicles.
Common Misconceptions
- The LPA is standard and not worth deep review.
- Side letters fix everything (they don’t fix core structural issues).
- Economics are the only important part of the LPA.
Key Takeaways
- LPA is the fund’s operating system.
- Review fees, conflicts, leverage, valuation, and governance clauses closely.
- Clarity and enforceability matter more than marketing language.