The PE fund is a legal artifact, not a thing in nature. It is a limited partnership designed to do one job: pool committed capital, deploy it through a small group of decision-makers, and return proceeds to a larger group of investors — under terms negotiated up front.
The legal anatomy
The fund vehicle is a limited partnership, usually formed in Delaware (US funds) or the Cayman Islands (international funds). Its only purpose is to hold investments. The general partner entity is a separate Delaware LLC owned by the senior partners; it is the legal manager of the fund and the recipient of carry. The management company is a third entity that employs the investment professionals and receives the management fee. Parallel funds are clones that invest pari-passu alongside the main fund; they exist to accommodate ERISA-regulated LPs, offshore investors, or LPs with tax-driven needs. Feeder funds aggregate non-US investors into a single LP slot in the master fund.
This separation is deliberate. The fund vehicle isolates investments. The GP entity isolates carry. The management company isolates payroll and lease obligations. Parallel and feeder vehicles isolate regulatory and tax exposures. None of this is overhead — it is the architecture that lets sophisticated LPs participate at all.
Why a limited partnership?
Two features of the LP form make it the dominant vehicle. First, pass-through tax treatment: LPs report their share of fund income as if they had invested directly, avoiding entity-level tax. Second, limited liability: LPs cannot lose more than their committed capital and have no liability for fund debts. The GP, by contrast, has unlimited liability for the GP entity — which is why GPs almost always sit behind a Delaware LLC.
Fund life and term
A standard fund has a 10-year life with two 1-year GP extensions, usually unilateral (the first) and LPAC-approved (the second). The first 4–5 years are the investment period, during which new investments can be made. The remaining 5–6 years are the harvest period, during which the GP exits investments and returns capital. After year 12, the fund is theoretically wound down — though in practice continuation vehicles (Chapter 33) or LP secondaries handle the tail.