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Worksheet|GP economics

GP commitment checklist

How much the manager commits is the start of the question. How it is paid for is the rest. A checklist and one worked example.

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GP commitment checklist

Use Part A when you read a fund deck, PPM, LPA or due-diligence questionnaire. For each question note the answer, where you found it, and mark it clear, follow-up or concern. Part B works one hypothetical example. About 30 minutes.

Part A. GP commitment checklist

1. Size and definition

  • What is the GP commitment, in per cent and in dollars?
  • Is the per cent measured against LP commitments or the total fund (LP plus GP)?
  • Is it a fixed amount, or does it scale with the final fund size? Is there a cap?
  • How does it compare with the manager’s previous funds, and with published data for this size and strategy? (Most public data is US-based.)

2. Form of contribution

  • How much is cash, and how much is met by waiving management fees?
  • If there is a waiver: is it elected up front and irrevocable? Does the waived amount get a priority share of profits?
  • Is the GP’s money invested through the main fund on the same terms, or deal by deal?

3. Financing

  • Is any of the commitment borrowed, by the GP, the management company or individuals?
  • Who lends, against what collateral, and with what covenants?
  • Are there personal guarantees? Is the loan to the GP, or to the fund (a subscription line or NAV facility)?

4. Who actually pays

  • Which individuals fund it, and does that line up with how carry is shared?
  • Is it funded from earlier funds’ distributions, and have those funds actually distributed?
  • Is there an outside seeder or GP-stakes investor, and what share of fees or carry do they take?

5. Fit with the fee deal

  • Management fee rate, basis and step-down.
  • Hurdle, catch-up, whole-fund or deal-by-deal waterfall, escrow and clawback.
  • Share of portfolio-company fees offset against the management fee.

Points to discuss, not automatic deal-breakers: a headline per cent with no cash and waiver split; large personally guaranteed loans; an undisclosed outside owner of the GP; a commitment funded from carry not yet realised.

Part B. Worked example: the effective GP commitment

A hypothetical “Fund I”: total fund size US$300m (LP plus GP). Headline GP commitment 2.0% of the total fund. Management fee 2.0% a year on LP commitments for a five-year investment period. The GP meets 50% of its commitment by fee waiver. Of the cash part, 60% is borrowed at 10% simple interest a year.

  1. What is the headline GP commitment in dollars, and what are total LP commitments?
  2. What is the annual management fee, and the total over five years?
  3. How much of the commitment is met by fee waiver, and what share of the five-year fee stream is that?
  4. What is the GP’s cash commitment, in dollars and as a per cent of the fund?
  5. How much is borrowed, and what is the GP’s own, unborrowed money?
  6. About how much interest does the GP pay over five years, if the full loan is drawn from day one?
  7. Stretch: the GP offers to raise the headline to 3%, with the extra 1% all by fee waiver. What happens to its cash and own-money commitment?

Answer key

  1. 2.0% × 300 = US$6.0m. LP commitments 300 − 6 = US$294.0m.
  2. 2.0% × 294 = US$5.88m a year; US$29.4m over five years.
  3. 50% × 6.0 = US$3.0m, about 10.2% of the five-year fee stream (US$0.6m a year).
  4. 6.0 − 3.0 = US$3.0m, or 1.0% of the fund.
  5. 60% × 3.0 = US$1.8m borrowed; own money US$1.2m, or 0.4% of the fund.
  6. About 1.8 × 10% × 5 = US$0.9m (simplified; real facilities are drawn as capital is called).
  7. The headline rises to 3%, but cash stays at US$3.0m (1.0%) and own money at US$1.2m (0.4%). More alignment on paper, not more of the team’s own cash at risk, although the GP does give up more guaranteed fee.

Want the full story? Read our briefing Who pays the GP commitment? or try the GP commitment calculator.

Education only. General educational material, not investment, legal or tax advice. All funds, managers and numbers are hypothetical. Discuss any real decision with a qualified adviser.

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Sources

Where the numbers come from

Cited and paraphrased. Checked by us in October 2026.

  1. Our briefing “Who pays the GP commitment?”, with its full source list (Carta 2025, Proskauer 2024, Torys 2025, Metrick and Yasuda 2010, Cooley 2015, MJ Hudson 2018 and 2019). carrycompound.com/gp-commitment.html#sources