There is no shortage of examples where LPs have gotten too high for their britches. The intoxication of being the party that brings capital to the table can foster a lot of reprehensible behavior. Arrogance, rudeness, domineeringness, and strongarming are a few less-than-kosher LP traits that many GPs have had to endure. Don’t get me wrong, I am not trying to be a simp for GPs, because in many cases, what’s good for the goose is also good for the gander, but I think it is productive to unbiasedly call out misbehavior where needed and also help develop a mutually acceptable standardized baseline for discourse and expectations.
Many LPs believe that the due diligence sword only swings in one direction, and the truth is that many GPs have let LPs think this way for too long. In the financial world, we have all been conditioned to believe that those who wield capital possess power, and as we all know, unchecked power can sometimes become inconsiderate. Of course, capital is essential for any investment transaction to occur, but as we universally emphasize with our acknowledgment of the importance of due diligence, the people and processes deploying the capital are just as important. So, if we examine the people and methods that will invest the capital, why would it be surprising to also scrutinize those providing the capital?
Throughout my career as an allocator, I have sporadically had some GPs directly ask about how whichever entity I was representing would behave as an LP. Understandably, these questions tend to be less threatening at the beginning of interactions and sometimes gather weight and jeopardy after a manager has successfully cleared all due diligence hurdles. In LP/GP relationships, power is dynamic, so GPs are careful not to rock the boat too early. With that thought in mind, I remember my first encounter with a manager who had a well-thought-out process (beyond the logically intrusive bureaucratic subscription document paperwork) for scrutinizing the type of capital it allowed into its fund. I need to quickly lay out the background to immerse you with a deeper perspective. Being originally from Africa, it has always been a goal of mine to identify strong private equity managers on the continent who can effectively compete—through investment skill, processes, alignment, and more—for the limited investment capital from the “developed” world seeking novel opportunities or even contend for capital that would otherwise be invested there (in the “first world”). In my view, I had found such a manager, Sango. This manager possessed all the desirable traits from an institutional standpoint, but also had an impressive and very nuanced understanding of the people side of things. The due diligence on Sango was thorough, and we had a decent amount of capital ready to commit to the fund. My ego and pride had just ascended to cloud nine, because two of my personal birds had been fed with one scone – 1) finding a manager that had all the ingredients to generate outsized returns, 2) the manager was based and invested in the motherland. That is when the folks at Sango were like, “Not so fast, buddy,” hahaha. “Now we have to initiate due diligence on you, the LP”. I wasn’t sure whether to be offended by them or be proud of them. Their due diligence on us was also thorough. They asked layered questions about our past behavior with other GPs related to capital calls, responsiveness, accretive networking, honest feedback, and many other things. This was a poignant wake-up call for me and pivotal in my growth as an analyst, as it forced me always to check my ego at the door and pay attention to what I bring to the investment table, beyond capital. For that, I am forever grateful to Charles and Richard.
As I touched upon earlier, subscribing to most funds involves a laborious process designed to assess regulatory compliance, creditworthiness, legal eligibility, tax status, and other relevant factors. However, once these administrative hoops are jumped through, there are still areas where LPs can fall short in the eyes of GPs. I list a few below.
- Timeliness: This is self-explanatory and multi-tentacled. GPs assess the timeliness of LPs with inquiries, surveys, capital calls, meeting requests, and invitations, among other matters. Time is valuable to everyone, and a tangible demonstration of respect is how parties treat each other’s time. With LP/GP relationships, time is typically linked to actual resources, so when LPs are not timely with meeting capital call schedules or RSVPing to a function or annual meeting, the efficient use of a GP’s resources is being undermined.
- Responsiveness: Timeliness and responsiveness are two peas in a pod. Even if the answer is “No” to a request for a meeting or even if an LP would prefer to pass on a survey, ignoring such prompts is not the way to go. LPs can be upfront about objections, but semi-ghosting a fund in which you are invested will always be counterproductive.
- Accretive-ness: GPs are the ones that invest our committed capital, but this does not mean our actions as LPs cannot be accretive to the manager post capital commitment. Providing thoughtful and constructive feedback to GPs can help them understand the broader needs of their LP base and streamline aspects of their communication or even improve their investment process/discipline. Additionally, LP curiosity around portfolio companies can lead to some helpful introductions that could potentially add monetary or networking value to GPs. There have been occasions when I have broadened a GP’s horizon by providing, from my little corner of the world, potential investment targets, potential add-on investors, and/or general market intelligence – this has always been highly appreciated by GPs even when not necessarily actionable.
- Longevity and growth: This one is a little circular because the performance and behavior of a GP is what will keep LPs coming back. However, I believe that if a GP has successfully passed an LP’s due diligence process and has not done anything terrible regarding its investing, treatment of people, or overall behavior, that GP should be granted the benefit of time to achieve what it promised. I am not opposed to jumping ship (i.e., not re-upping) if red and orange lights are flashing around the tangibility of a GP’s prospects, but I do understand why GPs would reward loyalty when grading their LP base.
- Reputational sturdiness: Usually, the caliber of a GP’s LPs is a reflection of the quality of a fund. Most GPs aim to maintain or constantly augment the quality of their LPs. This endeavor is tremendously aided by LPs also making a concerted effort to uphold high reputational standards. Reputational risk is real, and it tends to be a two-way street, so just as being associated with a shady GP can cause irreparable damage to an LP, the reverse is also true. GPs recognize that building a solid base of reputable LPs can attract other high-quality investors and boost their reputation as a preferred destination for top-tier investors – this makes reputation an important and closely examined metric.
Anthony Kwesi Hagan
Founder and Head of Research, FreedomizationTM
October 5th, 2025
