Private equity funds usually seek a blend of investments that includes low and high risk companies. Limited partner agreements outline risk exposure in investment classifications. But in the event of major losses in a leveraged buyout, limited partners risk only the money they invested. In contrast, general partners are responsible for all debt obligations, even when they exceed their original investments.
Duration of the Private Equity Funds and Exit Structure While the general partners exercise most of the power, limited partner agreements do outline restrictions around the types of investments the fund can undertake. A limited partnership agreement also designates the expected return on investment and the details of the fund’s lifecycle.
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