CFA Level I · CFA Level I Exam · Investments in Private Capital: Equity and Debt
In a typical private equity fund structure, the general partner (GP) most likely:
The general partner selects investments, manages portfolio companies and bears unlimited liability for the fund. Limited partners supply most of the capital with limited liability and no management role. The GP also earns carried interest, not just a fixed fee, and does not fund all the capital.
- Ahas limited liability and no role in investment decisions
- Bselects investments, manages portfolio companies and bears unlimited liabilityCorrect
- Ccontributes all committed capital and receives only a fixed management fee
Explanation
The GP runs the fund, selects and oversees investments and has unlimited liability. Limited partners provide most of the capital and have limited liability without a management role. The GP does not contribute all the capital or receive only a fixed fee, since it also earns carried interest.
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