A Limited Partnership (LP) is an investment fund structure comprising General Partners (GPs) who manage the fund and bear unlimited liability, and Limited Partners (LPs) who provide capital but have no management role and whose liability is limited to their committed capital. It is the standard legal structure for private equity and venture capital funds globally. LPs typically include pension funds, insurance companies, sovereign wealth funds, family offices and endowments. In return for their capital commitment, LPs receive a priority return up to the hurdle rate before GPs earn their carried interest.

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Example: a Swiss private equity fund raises CHF 200.0 million from 12 institutional LPs. The LP agreement (LPA) defines: management fees (1.8% of committed capital), hurdle rate (8%), carried interest (20% above hurdle) and a clawback mechanism ensuring GPs return excess carry if the fund underperforms over its full life. LPs receive quarterly reports and annual audited accounts throughout the fund's 10-year life.

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Hectelion advises funds on LP fundraising and structures distribution waterfalls and carried interest mechanisms in private equity fund formations.