No-Fault Divorce

A provision allowing a supermajority of limited partners to end a fund's investment period without alleging wrongdoing by the manager.

Example

LPs holding 75% of commitments vote to stop new investments.

Important

It is rarely used, and its value lies in existing: a manager knows LPs have a genuine remedy.

Related terms

  • LP Advisory Committee — A committee of limited partner representatives consulted on conflicts of interest, valuation policies and fund extensions.
  • GP Commitment — The amount of their own money a fund's managers invest in the fund alongside LPs.

Lessons that explain it

  • The clauses that decide what happens when something goes wrong — Beyond fees and carry, a fund's agreement governs who must stay, how capital can be reused, what happens if LPs lose confidence, and what you are entitled to know. (12 min)

All 578 terms in the Investing glossary