Understanding GP removal provisions linked to key person misconduct in private market funds

Holding GPs accountable for key person misconduct

In private market funds, the integrity and ongoing involvement of key persons – senior investment professionals named in the limited partnership agreement (LPA) – are critical factors to a fund’s success and investor confidence. Recognizing this, many funds have instituted robust mechanisms to hold GPs accountable for the misconduct of key persons through GP removal.

This article focuses on infrastructure,¹ real estate,² and private equity,³ reflecting their strategic development as asset classes.

GP removal: a central mechanism for investor protection

The ability to remove the GP if a key person engages in improper conduct is a significant safeguard for investors. Preqin Term Intelligence data shows that GP removal provisions are present in just under 50% of private equity, real estate, and infrastructure funds, underscoring a broad commitment to governance and risk management across asset classes (Fig. 1). Typically, these LPA provisions specify that the GP may be removed if a court adjudicates a key person as having engaged in improper conduct related to fund activities.

Fig. 1: GP removal tied to key person misconduct

_{Source: Preqin Term Intelligence}

This accountability mechanism is designed to deter misconduct and ensure that individuals in pivotal roles are held to high ethical standards. The prevalence of these provisions highlights private equity, real estate, and infrastructure funds’ leadership in adopting strong governance practices to protect investors.

The limits of GP accountability: carry entitlement post-removal

While GP removal for key person misconduct is intended as a meaningful sanction, the actual economic consequences imposed on the GPs are often not significant. Where carry is retained, this raises questions about the effectiveness of GP removal as a true deterrent and accountability measure. Instead of imposing marked financial consequences, the removal often results in procedural change without fully aligning incentives or upholding investor protection.

For further insights and data relating to retention of carry following GP removal, subscribe to Term Intelligence.

Improper conduct in the broader key person event framework

Improper conduct is just one trigger within the broader framework of key person event provisions in LPAs. Preqin Term Intelligence data shows that time and attention provisions are the most prevalent triggers, with more than 85 funds in private equity, real estate, and infrastructure incorporating this mechanism to ensure continuous engagement and operational stability from Group 1 executives (Fig. 2).⁴

In contrast, misconduct-based triggers, such as improper conduct, were reflected in 15 and 9 of private equity fund documents, for Group 1 and Group 2 respectively, offering a pathway for remedial action when ethical standards are breached.

Fig. 2: Key person event triggers across asset classes

_{Source: Preqin Term Intelligence}

This dominance of time attention provisions reflects the market’s prioritization of active and engaged leadership, which is often seen as the strongest safeguard for investor interests. While misconduct triggers are essential for upholding ethical standards, the prevalence of time and attention requirements suggests that LPs are equally concerned with ensuring that key persons remain committed to the fund’s success, not just free from wrongdoing.

GP removal provisions are an important part of the investor protection toolkit in private markets, particularly for holding key persons accountable for improper conduct. However, the continued retention of substantial carried interest by removed GPs reveals a gap in true accountability. As improper conduct provisions sit alongside dominant time and attention triggers in LPAs, it is clear that the market values both ethical behavior and active engagement from key persons.

For investors seeking robust protection, the challenge remains to ensure that accountability mechanisms in private market funds deliver meaningful consequences and effectively align interests at every level.

Learn more about Term Intelligence.

_{1. Global infrastructure assets under management is projected to approach $3tn by 2030F (source: Preqin Infrastructure in 2026 Global Report)}

_{2. Real estate fundraising rebounded in 2025, with over $127bn raised in the first three quarters, nearly matching full-year 2024 levels (source: Preqin Real Estate in 2026 Global Report)}

_{3. As of March 2025, global private capital stood at $3.66tn, with private equity comprising 45% (source: Preqin Private Equity in 2026 Global Report)}

_{4. LPAs typically distinguish between ‘primary’ or ‘Group 1’ key persons and ‘secondary’ or ‘Group 2’ key persons (together ‘the Groups’). Group 1 key persons are those whose departure or diminished involvement would fundamentally alter the fund’s direction. ‘Group 2’ key persons are those whose responsibilities, while important, are more limited in scope.}

_{The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin accepts no liability for any decisions taken in relation to the above.}