A private-equity or venture fund is a closed-end, finite-life limited partnership. Investors (Limited Partners (LPs)) do not hand over cash on day one; they sign a commitment, a promise to fund capital when called, up to a stated ceiling, over the fund's life. The General Partner (GP) (the management firm) controls the vehicle, sources and executes investments, and is bound by a Limited Partnership Agreement (LPA), the fund's constitution: term, fees, the waterfall, key-person and removal provisions, and reporting duties all live there. In the US, this is typically a Delaware limited partnership; in India, a growth-PE or VC fund is typically structured as a Category II Alternative Investment Fund (AIF) under the SEBI (Alternative Investment Funds) Regulations, 2012, a wrapper for funds (PE, VC, debt, funds-of-funds) that are not required to, and under the Regulations do not, employ leverage for their investments (only short-term borrowing for operational/liquidity needs is permitted). The Regulations set a minimum scheme corpus of ₹20 crore and a minimum investor commitment of ₹1 crore (₹25 lakh for the AIF's or manager's own employees/directors), verify the current figures against the live SEBI AIF Master Circular before relying on them in practice, as thresholds are amended by circular from time to time.
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How long does a fund last, and what does the GP put in?
The classic fund term is 10 years, with the GP typically holding an option to extend by up to two further one-year periods with LP or advisory-committee consent, enough time, in principle, to invest, build, and exit a full portfolio, though real funds routinely run longer. Inside that term sits the investment period (typically 4–5 years), during which the GP calls capital for new platform investments; after it, calls are normally restricted to follow-on investments, fees, and expenses, and the GP's attention shifts from deploying to harvesting. The GP itself commits capital alongside the LPs, the GP commitment, commonly 1–5% of fund size, funded in cash, on the same terms as LP capital (it goes in and comes out pari passu), so that the people making the decisions have their own money genuinely at risk. This module's two running examples both use this structure; Konkan Growth Partners Fund III (synthetic), an Indian Category-II-AIF-wrapped growth-PE fund, and Cascadia Ventures Fund IV (synthetic), a US Delaware-LP-wrapped venture fund, are built and Python-verified in full in the worked examples.
{
"skill": "Reading an unfamiliar LPA's economic terms quickly and correctly",
"use": "Have a chat assistant summarize a real or specimen LPA's fee, hurdle, waterfall type (American vs European), catch-up, and GP-removal terms into a one-page term sheet you can scan before a deeper read.",
"tools": ["Chat assistants — Claude, ChatGPT", "Document/PDF AI run over a specific LPA or the ILPA Model LPA"],
"prompt": "Summarize this LPA's economic terms into a table: management fee rate and basis (committed vs invested) by period, preferred return rate and compounding convention, waterfall type (American/deal-by-deal or European/whole-fund), catch-up percentage and target, final carry split, and any clawback or GP-removal provisions. Flag anything unusual against typical market terms.",
"verify": "An LPA is a legal contract with defined terms — the model's summary is a reading aid, never a substitute for the clause itself. Trace every term back to its exact clause and section number in the actual document (Guardrail #1); recompute at least one worked distribution scenario by hand from the clause language before trusting the AI's characterization of 'typical' vs 'unusual' (Guardrail #3); date-check against the current, fully executed LPA, not a term sheet or side letter that may have been superseded (Guardrail #4).",
"diy": "You must already be able to read a waterfall's tier structure and identify a hurdle/catch-up/carry clause unaided — this Core section and Worked Examples 5-6 build exactly that. AI accelerates the summarizing; it must never be the thing that tells you what a clause means.",
"market": "US"
}