Limited partner

A partner whose liability is capped at what it contributed, in return for no part in management. In a private fund it is the investor, committing capital it can rarely get back before the fund ends.

Where you will meet it

Limited partner appears in 5 learning outcomes on the CFA syllabus. A few of them:

• Explain how a limited partnership is organised and governed
  CFA Level I · Alternative Investments

  “The general partner sources, manages and exits investments and bears unlimited liability; the limited partners supply most of the capital, have liability capped at their commitment, and have no role in management.”

• Explain the legal forms a business can take and what each means for its owners
  CFA Level I · Corporate Issuers

  “A general partnership spreads capital and labour but leaves each partner liable for the whole; a limited partnership confines that exposure to the limited partners' contributions while the general partner retains it.”

• Explain the ways of investing privately and the vehicles used, and when each one suits an investor
  CFA Level III · Private Markets Pathway

  “The general partner manages the fund and bears general-partner liability for the partnership (in practice the GP is usually housed in a limited-liability entity), while limited partners commit capital that is called over an investment period, within a fixed, extendable term.”

• Explain what a general partner does in running a private fund and what it owes the fund's investors
  CFA Level III · Private Markets Pathway

  “It calls and distributes capital, values the holdings and reports to limited partners, often answering to an LP advisory committee.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with L · Glossary