Private markets, explained from both sides of the tableEducation only. Not investment advice.

GP economics|Briefing

Who pays the GP commitment?

“Two per cent, skin in the game” is where the question starts, not the answer. How much managers commit, and where that money really comes from.

WatchGet the worksheet

Watch

The video

About eight minutes. Koi explains, Kai makes the GP’s case, Leo asks the LP’s questions.

What you’ll learn

By the end, you can

  • Define the GP commitment and give today’s typical range, with the caveats on the data.
  • Explain why LPs treat it as an alignment signal, and what it doesn’t prove.
  • Name five ways GPs fund it, and how each changes the alignment.
  • Work out a GP’s effective cash and own-money commitment after fee waivers and borrowing.
  • Recap 2-and-20, the hurdle and the catch-up, and why headline fees understate the cost.
  • Use a due-diligence checklist to question a GP commitment.
  • Compare how commitments are sized, funded and negotiated in the US, Europe and Asia-Pacific.

The short version

The GP’s own money, in the fund, on the same terms

The GP commitment is the money a fund’s manager invests in its own fund, alongside the LPs and on the same terms. ILPA says the GP should hold “a substantial equity interest in the fund”, paid in cash rather than through fee waivers or special financing, and invested through the main fund rather than deal by deal.

Historically, commitments hovered around 1–2% of fund size; today 2–4% is more typical, according to Torys. In Carta’s US data the median private equity commitment is 2.55% (75th percentile 5.23%) and the venture median is 1.7%. In Proskauer’s sample of 71 European buyout funds, 2% and 3% were the most common levels.

Read the fine print on “%”. Carta measures against total fund size (LP plus GP money). ILPA’s model terms and Proskauer measure against LP commitments. Same fund, different number.

Why LPs care

Management fees are paid whatever happens. In Metrick and Yasuda’s study of 238 funds, about 60% of a GP’s expected revenue came from fixed components that don’t depend on performance. The GP’s own money is the part that loses alongside the LPs, which is why investors look at it so closely.

Where Kai’s 2% comes from

Five ways to fund the commitment

Each route counts toward the headline. Each changes how much the team really has at risk.

Cash

The partners’ own money, paid in like any LP. What ILPA prefers.

Partners

Fee waiver

The manager gives up part of its fee for a priority share of future profits. Largely a US tax construct; seldom seen in Europe.

Fees it would have earned

GP loan

A facility secured on the GP’s fund interests, fees or carry, used to meet capital calls.

A lender

Recycled distributions

Proceeds from earlier funds rolled into the next one. Only as good as what has actually been paid out.

Earlier funds

GP stake or seeder

An outside investor buys a minority slice of the manager for a lasting share of fees or carry.

An outside owner

Sources: ILPA Principles 3.0; Torys (2025); Global Legal Insights (2025); Cooley (2015); MJ Hudson (2018, 2019).

Same 2%, different alignment|Illustrative

One headline 2%, three readings

A hypothetical US$300m “Fund I”, not a real fund. Worked through step by step in Part B of the worksheet.

  1. Headline2.0% of the fund = $6.0m
  2. Less the fee waiver (50%)1.0% paid in cash = $3.0m
  3. Less the GP loan (60% of the cash)0.4% own money = $1.2m

Hypothetical figures for illustration only. Not data on any real fund.

Try your own numbers in the calculator

From the slides

Inside the briefing

Charts are redrawn from the published numbers, with the source on every slide.

Slide: today’s US median sits above the old 1 to 2 percent norm. Bar chart of private equity and venture capital GP commitments
How big is it? US medians against the old 1–2% norm.
Slide: where Kai’s 2 percent actually comes from. Five funding routes
Five funding routes, and who really puts up the money.
Slide: fee waivers decoded. A fee given up now, for a share of profits later
Fee waivers, decoded.
Slide: same question, three answers. Comparison grid of the United States, Europe and UK, and Asia-Pacific
Same question, three answers: US, Europe and Asia-Pacific.

Free download

Take the worksheet to your next fund meeting

The checklist, the worked example, a mini waterfall and the regional comparison, in one printable file.

Preview only. Nothing was sent: the email list isn't connected yet.

Sources

Where the numbers come from

Cited and paraphrased. Figures are as published at the date shown and may since have changed. Tax treatment varies by country.

  1. Carta, Fund Economics Report 2025 (Dec 2025). About 2,000 US-domiciled funds administered on Carta; skews to smaller and newer managers. carta.com/data/fund-economics-report-2025/
  2. ILPA, Principles 3.0 (2019), “GP Commitment and Ownership” and glossary. ilpa.org/wp-content/uploads/2019/06/ILPA-Principles-3.0_2019.pdf
  3. ILPA, Model LPA (Whole of Fund) Term Sheet (updated July 2020). ilpa.org/
  4. Proskauer, Fundraising Terms and Trends in European Buyout Funds (2024): 71 funds raised 2022–23. www.proskauer.com/uploads/buyout-fundraising-europe-2024
  5. Torys LLP, Creative capital: how sponsors are funding increasingly large GP commitments (Oct 2025). www.torys.com/en/our-latest-thinking/publications/2025/10/how-sponsors-are-funding-increasingly-large-gp-commitments
  6. Torys LLP, To stake or not to stake, Torys Quarterly (Q1 2025). www.torys.com/our-latest-thinking/torys-quarterly/q1-2025/gp-staking-vs-alternative-liquidity-solutions
  7. Metrick, A. and Yasuda, A. (2010), “The Economics of Private Equity Funds”, Review of Financial Studies 23(6). doi.org/10.1093/rfs/hhq020
  8. Cooley, IRS Issues Long-Awaited Proposed Regulations on Management Fee Waivers (July 2015). www.cooley.com/news/insight/2015/irs-issues-longawaited-proposed-regulations-on-management-fee-waivers
  9. MJ Hudson via Mondaq, US vs European fund terms (2018) and GP/LP alignment (2019). www.mondaq.com/uk/maprivate-equity/688504/
  10. Bain & Company, Asia-Pacific Private Equity Report 2026 (Mar 2026). www.bain.com/insights/asia-pacific-private-equity-report-2026/
  11. Alternative Credit Investor, on Corpay’s Lender Book Report (Apr 2026). alternativecreditinvestor.com/2026/04/23/growth-in-demand-for-gp-financing-not-translating-to-even-access/