Limited partner (LP).

In plain English

A limited partner is a passive investor in a limited partnership, typically a pension plan, endowment, family office, or wealthy individual who commits capital to a private fund. The limited part refers to liability: an LP can lose the money committed but is not personally responsible for the partnership's debts. That protection depends on staying passive, so LPs do not pick investments or manage the portfolio. Money is usually promised up front and then called in installments as deals appear. In exchange for giving up control and access to the cash, LPs expect returns above what public markets pay.

01Why it matters

Being a limited partner means your money can be locked up for years and called on short notice, so the commitment shapes your cash planning as much as the return does.

02The math, step by step

Say an LP commits $5,000,000 to a fund. In year one the GP calls 20 percent, or $1,000,000. In year two it calls another $1,500,000. The LP still owes the remaining $2,500,000 on demand and must keep it available even though it is not yet invested.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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