General Partners (GPs) are the managing partners of private equity or venture capital funds. They are responsible for the day-to-day operations of the fund, including sourcing, evaluating and executing investment opportunities, as well as fundraising from Limited Partners (LPs). A GP typically has a significant financial interest in a fund, as they often contribute a portion of the capital and receive a share of the profits generated by the fund, known as ‘carried interest’. The GP also has a fiduciary duty to act in the best interest of the LPs and to manage the fund in accordance with the fund’s investment strategy and objectives. 

Limited Partners (LPs) are investors who provide capital to a private equity or venture capital fund. They are passive investors who do not play an active role in the day-to-day operations of the fund, and their liability is limited to the amount of their investment. LPs might include institutional investors such as pension funds, endowments and foundations, as well as high-net-worth individuals. As limited partners, LPs typically have limited control over the fund’s investment decisions and management, and rely on the GP to manage the fund and make investment decisions on their behalf. In exchange for their investment, LPs receive a share of the profits generated by the fund, and the GP may charge them management fees to cover the costs of managing the fund. 

Overall, LPs play an important role in providing the capital that fuels private market investment and GPs manage the investments and seek to generate returns for the benefit of both GPs and LPs. 

The role of GPs in providing liquidity to LPs 

GPs play an important role when it comes to providing liquidity to LPs and making sure they have access to secondary markets when needed. In some case, LPs may want to sell their position in a fund and GPs can help facilitate this by either purchasing LP interests themselves or arranging a secondary market transaction with a third-party. GPs may also offer LPs the opportunity to sell their interests back to the fund at regular intervals (‘liquidity rounds’) or under certain conditions. 

But LPs do have routes to liquidity outside of a GP. Yes, it can be challenging to access liquidity without the involvement of the GP but opportunities exist via firms who specialise in providing liquidity solutions for private market investors, such as secondaries funds or private placement platforms (for example, HarbourVest Partners, Landmark Partners, Coller Capital, Hamilton Lane, Setter Capital). These firms may purchase LP interests in private funds, and give LPs more flexibility and control over their private market investments. However, these options are typically limited and may be subject to restrictions and complexities.