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General Partner in Private Equity (Definition) | Salary | Roles of GP's - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the
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bell ican today we have a topic with us
called the general partners in the
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private equity see there are different
sort of partners there are dormant
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partners would not actually involve
themselves in the day-to-day activity of
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the business there are some general
partners or the whole time partners who
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manages the business completely on a
daily basis like you know on an
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operating basis so there are different
sort of partners but over here we are
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discussing only the general partner as
you can see over here there are this
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couple of things that is written written
here in the dialogue box
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the general partner is responsible for
the overall management and the
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administrative administration of the
operation of the partnership and the
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general partner is managed by Jay goth
well we'll try and understand this in a
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detail format first and the foremost
thing who are the general partners see a
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private equity fund that is created
needs to be managed so a general partner
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that is a GP refers to a private equity
firm who has the responsibility of
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managing a private fund so the private
equity firm acts as a GP and external
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investors are like the LPS okay so the
investors who have invested the fund
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would be known as the limited partners
and the PE firm would be known as the
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general partners right so it the
hierarchy goes down something like this
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LP then there is a GP below that there
is a general partner and they manage
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let's say fund 1 over here fund 2
here there are three other like CCC
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three other funds
they have and same over here CCC so this
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is our the whole hierarchy goes now what
is the role of the general partners well
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the general partners have the
responsibility of taking all the
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decisions
okay related to the management of the
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private equity fund so they are other
specific functions that the general
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partner carries out you know for
instance the general partner must manage
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the private equity funds portfolio okay
so that portfolio which consists of all
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fund invested by the LPS so in simple
terms the general partners is
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responsible for administration
management and operations of the private
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equity fund so a be firm functions and
operate under the guidance of the
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general partners who sources the capital
from various investors and the managers
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the fund by investing this capital and
hence first in order of the
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responsibility is the goal of the or
goal to raise you can say funds followed
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by the administering the day-to-day
operations of the private Kotori fund
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so this day to day operations includes
identifying like the investment
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opportunities see maximizing the value of the investment and liquid in the investment
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so in a manner so that the distribution
can be made to LPS the main objective of
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GPS is to manage the private equity fund
the benefit of the LPS that have
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invested in it and act in interest of
the LPS so given the LPS they commit
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their fund we expect a positive return
on that investment so the GP is
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entrusted with the responsibility to
manage the funds to meet the objectives
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so additionally unlike LPS the GPS have
a sort of what we call as the legal
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liability okay legal liability is there
and the GPS are the hepatic actions
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carried out or by the fund for that such
legal liabilities now on the
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compensation part
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the compensation of the GP is designed
in such a manner that it aligns with the
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financial objective okay of the LPS
so the GP are either paid through
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management fees or compensation
now the General Partner they earn the
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annual management what we call as fee
for compensation and the general partner
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they own annual management fee up to
let's say 2% which is used for the
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purpose of carrying out the admin duties
they cover the expenses to be made like
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overhead in salaries so the GP can earn
a proportion of the private equity fund
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profits and the fees termed as the
carried interest so the investment made
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by the fund on the profit and gp's
receives a share of the profit in the
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form of the carried interest the carried
interest is usually between 5 to
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30% so to get a better
understanding let's have a look at one
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of the example to get a more clear idea
let's say that a particular fund and the
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asset that were invested in earns a
return of let's say a $100 billion
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dollars the management fee that has
received by the GP would be would then
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amount to let's say 2 billion and
similarly if the return of the
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investment is let's say 50 billion the
carried interest would be 20% closely to
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that of 50 billion in return of the
investment so that's it for this
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particular topic this are the rules this
is who is General Partner his role the
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compensation part and the last and the
last thing you know that involves are
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the examples that we evaluated so that's
it for this particular topic if you have
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