General Partner
Also written GP · General Partner (GP) · General Partners
The foreign-terminology name for the entity that manages a Category III AIF's investments — the Indian equivalent is the investment manager, and the fund's investors correspondingly become "Limited Partners" (LPs).
In plain language
India sets up most Category III AIFs as trusts. An investment manager picks and manages the investments. Abroad, funds mostly use a limited liability partnership structure instead. There, the same role has a different name. The manager is called the General Partner, or GP. The investors who put in capital are called Limited Partners, or LPs.
Indian practice borrows this language loosely too. The workbook itself notes that abroad, "the investment managers are known as general partners or GPs". So a distributor should recognise GP and LP terms, even when the Indian fund in question is not actually set up as a partnership.
How it works
The GP takes on the manager's economic obligations along with the manager's title. Under the SEBI (Alternative Investment Funds) Regulations, 2012, the sponsor or manager of a Category III AIF must have a continuing interest of not less than 5% of the corpus of the fund or Rs 10 crore, whichever is lower — this is the regulatory expression of the GP's "skin in the game", the same obligation whether the fund calls its manager a General Partner or simply an Investment Manager.
That continuing interest must be a cash investment, not a waiver of management fees, and it stays locked in until distributions to investors are completed in full — the GP is the first investor into the fund and the last one paid out.
A worked example
Kaveri Alpha Fund LLP structures its Category III AIF as a limited liability partnership, with Kaveri Capital Advisors as the General Partner and its 38 subscribing investors as Limited Partners. The fund's corpus is Rs 120 crore.
As GP, Kaveri Capital Advisors must maintain a continuing interest of the lower of 5% of the corpus (5% of Rs 120 crore = Rs 6 crore) or Rs 10 crore. Since Rs 6 crore is lower, that is the figure: Rs 6 crore of Kaveri Capital Advisors' own money stays invested in the fund throughout its life, in cash, not netted against the management fee it earns from the LPs.
If the same fund were instead structured as a trust — as most Category III AIFs in India are — the GP would simply be called the investment manager, the LPs would be called unit holders or contributors, and the Rs 6 crore continuing interest obligation would be identical.
Why NISM asks about it
Chapter 3, section 3.3.1.4 (Investment Managers), introduces the GP/LP terminology as the international equivalent of the Indian investment manager and investor roles, immediately before explaining sponsor and manager continuing interest in section 3.3.2. Expect a straightforward matching question — GP corresponds to investment manager, LP corresponds to investor/unit holder — sometimes dressed up with the 5%-or-Rs 10 crore continuing interest figure attached.
Common exam traps
- GP and LP are naming conventions from the partnership structure, not separate legal categories in Indian regulation. A Category III AIF structured as a trust has no formal "general partner" — the equivalent role is simply the investment manager.
- The GP's continuing interest is 5% of corpus or Rs 10 crore, whichever is lower — the same figure that applies to the sponsor or manager of any Category III AIF, regardless of what the parties are called.
- Do not confuse the GP's continuing interest with the minimum investor ticket (Rs 1 crore, or Rs 25 lakh for employees/directors of the manager) — one is the manager's own skin in the game, the other is what an LP must commit to get in.
Check yourself
1.In a Category III AIF set up as a Limited Liability Partnership, who is responsible for all statutory compliances stipulated for the LLP?
- a)The trustee appointed by the settlor
- b)The limited partners, acting collectively
- c)The merchant banker who filed the PPM
- d)The sponsor, acting as the Designated Partner
Show the answer
Answer: (d) The sponsor, acting as the Designated Partner
The workbook states: "In a limited liability partnership structure (LLP), the sponsor of the Category III AIF is the Designated Partner and is responsible in respect of all statutory compliances stipulated for the LLP." A trustee and a settlor (a) exist only when the AIF is formed as a trust. Option (b) borrows foreign terminology. In most foreign jurisdictions the manager is the General Partner (GP) and the investors are the Limited Partners (LPs). The LPs are investors and do not carry the compliance burden. The merchant banker (c) is a service provider that files the PPM and does due diligence on it. It is not responsible for the fund's statutory compliance.
Where this is taught
Free preparation for NISM Series XIX-BRelated terms
- Category III AIFThe AIF category for funds running diverse or complex trading strategies with leverage — hedge funds and their kin — and the only category denied tax pass-through status.
- CorpusThe total of all capital commitments raised by a Category III AIF scheme from its investors — not the cash actually collected, which SEBI requires to be at least Rs 20 crore.
- Investment ManagerThe person or entity appointed by an AIF's sponsor to manage its investments — deal sourcing, structuring, oversight and exit — known abroad as the "General Partner" in an LLP fund.
- TrusteeThe party that holds a Category III AIF's trust deed when the fund is set up as a trust, appoints the investment manager and custodian, and receives the annual audit findings on the fund's behalf.
- Designated PartnerIn a Category III AIF set up as an LLP, the sponsor acting as the partner responsible for all statutory compliances of the LLP — and bound by the AIF code of conduct.
- Limited PartnerThe label used in foreign jurisdictions for an investor who subscribes to units of a fund structured as a limited liability partnership, as against the General Partner who manages it.