Limited Partnership Agreement (LPA)
Private Equity glossary · Private Equity Fundamentals
Definition
The bespoke contract governing the closed-end PE fund's life — defining commitment period (typ. 5-6 years), fund term (typ. 10 years + two 1-year GP extensions), management fee schedule, carry waterfall, hurdle rate, GP commit, key-person clause, no-fault and for-cause removal rights, LPAC composition and authority, MFN provisions, investment restrictions (e.g., 15-20% single-deal cap), and clawback mechanics. Material amendments typically require 66.7% or 75% LP consent. The LPA plus side letters together define the LP-GP economic relationship.
Limited Partnership Agreement (LPA) in plain English
When investors put money into a private-equity fund, the Limited Partnership Agreement (LPA) is the master rulebook everyone signs that spells out exactly how the fund will operate for its whole life. It nails down the big questions: how many years the managers have to invest the money (usually 5-6), when the fund shuts down and returns everything (around 10 years), what fees the managers charge, how profits get split, and what happens if a key manager quits or misbehaves. It's like the detailed lease-plus-house-rules you'd sign before a long roommate arrangement — no one wants to argue about who does dishes *after* a fight, so it's all settled up front. Because it's so important, changing it later typically requires two-thirds or three-quarters of the investors to agree.
Also called: LPA
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