Who supplies the money
Nobody in PE is spending only their own money. Limited Partners (LPs), pension funds, university endowments, insurance companies, wealthy individuals, commit capital to a fund and mostly stay out of day-to-day decisions. General Partners (GPs) are the PE firm itself: they raise the fund, decide what to buy, and run it.
Who does the work
Within a GP, investment partners (often called dealmakers) source and structure deals, while operating partners are the people, often former operators themselves, who go into a portfolio company after the deal closes and actually help run the improvement plan.
Two more groups matter once a deal exists: the portfolio company's own management team, who keep running the business day to day (PE firms rarely install an entirely new team on day one), and debt providers, banks and credit funds who lend part of the purchase price, a piece you'll come back to heavily in Lesson 15.
| Fee | Typical rate | Charged on |
|---|---|---|
| Management fee | ~2%/year | Committed capital |
| Carried interest ("carry") | ~20% | Profits above the hurdle |
| Hurdle rate | ~8%/year | Minimum LP return before carry kicks in |
Checkpoint
- Limited Partner (LP): supplies capital, largely hands-off.
- General Partner (GP): the PE firm; decides and executes.
- Investment partner: sources and structures deals.
- Operating partner: works inside portfolio companies post-deal.
If anything here still feels unclear, ask before moving to Lesson 3.