General Partners, Limited Partners and MOICGP
In a private fund, the general partner (GP) manages the money and makes decisions, while limited partners (LPs) supply most of the capital with liability limited to what they invest. Multiple on invested capital (MOIC) is total value returned divided by money invested: $25 million back on $10 million is 2.5×.
Private equity funds are usually set up as limited partnerships. Knowing who the general partner and limited partners are, and how returns are measured with the multiple on invested capital, makes it far easier to read fund documents and performance reports. Fund law and tax treatment differ by country.
- Category
- Fundamentals and Macroeconomics
- Reading time
- 4 min
- Also called
- Private equity fund structure, GP and LP, Multiple on invested capital
- Updated
GP, LP and MOIC in plain words
A general partner (GP) — usually linked to a venture capital or private equity firm — raises money from limited partners for a fund set up as a limited partnership, then invests and manages that money.1
Most private equity funds are partnerships: a general partner runs the investments and owes duties to investors, while limited partners — usually institutions or wealthy individuals — supply most of the money.2
A limited partner's liability for the fund's debts is capped at the money it put in or promised.1
MOIC adds what the fund still holds to what it has paid out, then divides by the money investors put in.3
How to read a private fund's terms
Identify the GP
The GP both invests in and manages the fund.1
Check LP liability
Note that an LP can lose at most the capital it contributed or committed.1
Read the LPA
Read the partnership agreement: how the GP calls capital, how profits are split, what fees apply and when LPs can withdraw.4
Plan for the horizon
Plan for a long lock-up — typically ten years or more.5
Calculate MOIC
Add remaining value and distributions, then divide by capital contributed.3
Prefer net figures
Ask for net multiple of invested capital as well as gross, because fees reduce what LPs receive.3
Worked examples
Example 1 — MOIC
2.5× multipleHypothetical LPs contribute $10 million; the fund has paid out $15 million and still holds assets worth $10 million.
| Distributions | $15m |
| Remaining value | $10m |
| MOIC | 2.5× |
($15m + $10m) ÷ $10m = 2.5×, following the sum of unrealized value and distributions divided by the total capital contributed.3
Example 2 — Gross vs net
Fees matterA hypothetical fund reports 2.0× gross; after fees and carried interest LPs get 1.7×.
| Gross MOIC | 2.0× |
| Net MOIC | 1.7× |
The gap between gross and net is why reporting rules separate the net multiple.3
Example 3 — Time
Same MOIC, different valueA hypothetical 2.0× MOIC is earned over 4 years in one fund and 12 years in another.
| Fund A | 2.0× in 4 years |
| Fund B | 2.0× in 12 years |
MOIC ignores time, which matters when funds typically run for a decade or more.5
General partner vs limited partner
| Aspect | General partner (GP) | Limited partner (LP) |
|---|---|---|
| Role | Manages and invests the fund | Supplies capital |
| Liability | Typically unlimited, often via a company | Limited to commitment |
| Control | Makes investment decisions | Little day-to-day say |
| Pay | Fees and a profit share | Remaining returns |
Where these terms matter
Fund due diligence
Compare GP terms before committing to Portfolio Allocation in private assets.
Performance review
Compare MOIC with public-market Profit and Loss.
Fee analysis
Gross-to-net gaps show the cost of Leverage and fees.
Buyout understanding
Many buyout funds use heavy Leverage in deals.
Advantages and disadvantages
Advantages
- LP liability is limited to the commitment.
- MOIC is easy to calculate and explain.
- Clear split between manager and investor roles.
Disadvantages
- MOIC ignores how long money was tied up.
- Unrealised values rely on GP estimates.
- Capital is locked up for many years.
- Fees and conflicts can erode returns.
Going deeper
Read as far as you need. Each level builds on the one before it.
Who does what
Beginner
A general partner raises money from limited partners and both invests in and manages the fund.1 Limited partners mostly provide capital.
The partnership agreement
Intermediate
MOIC and its limits
Advanced
A 2023 SEC rule defined MOIC as unrealised value plus distributions, divided by the capital investors contributed.3 That rule was later vacated by a US court, but the definition remains standard. Because MOIC ignores time, it is usually read with the internal rate of return. Fund regulation differs by country.
Common mistakes
Comparing gross MOIC with net returns
Use the same basis.
Ignoring time
A 2× over 12 years is weak.
Trusting unrealised value blindly
It is an estimate until assets are sold.
Assuming LPs control the fund
The GP makes the decisions.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- The GP manages the fund; LPs supply capital.
- LP liability is limited to what they commit.
- The LPA sets fees, profit split and capital calls.
- MOIC = (distributions + remaining value) ÷ capital in.
- MOIC ignores time, so read it with IRR.
Frequently asked questions
Does a GP invest its own money?
Is MOIC the same as IRR?
Are fund rules the same everywhere?
Further learning
- Leverage
How buyout funds use debt.
- Liquidity
Why fund capital is locked up.
- Portfolio Allocation
Fitting private funds into a portfolio.
- Profit and Loss
Measuring returns.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- SEC. Glossary (Resources for Small Businesses) (opens in a new tab) Checked .
- NAIC. Capital Markets Primer: Private Equity (opens in a new tab) Checked .
- SEC. Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews (Release IA-6383) (opens in a new tab) Checked .
- SEC. Starting a Private Fund (opens in a new tab) Checked .
- Investor.gov (SEC). Private Equity Funds (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.