Definition - What does GP Commitment mean?
GP commitment refers to the amount of invested capital that is expected from the general partner of a private equity fund. Limited partners expect the GPs to have "skin in the game" by committing some of their own money into the fund that they are raising. This commitment must be significant enough to ensure that the GP wins when the LPs win, and feels the hurt alongside the LPs when returns fall short of expectation.
Divestopedia explains GP Commitment
While a significant commitment may vary, a general rule of thumb is for the GP commitment to be a minimum of 1% of total committed capital. For example, if the general partner raises a $200 million fund, then the GP commitment is expected to be at least $2 million. Usually, a higher commitment is expected of more established firms, particularly when raising larger funds. The GP commitment is expected to be in cash and not in the deferral of management fees or the waiver of carry.
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