What role do Limited Partners (LPs) have in private equity funds?

Limited Partners (LPs) primarily serve the role of providing capital to private equity funds while maintaining limited involvement in the management of the fund. This structure allows them to invest in the fund to achieve potential returns without taking on the responsibilities associated with the fund's operational or investment decision-making processes.

LPs typically include institutional investors, such as pension funds, endowments, and wealthy individuals, who contribute significant amounts of capital. Their main focus is to evaluate the performance of the fund and the general partners (GPs) who manage the fund's investment strategy. LPs rely on the expertise of GPs to execute investment decisions and manage the portfolio, aligning with the traditional structure of private equity where GPs handle the day-to-day operations and strategic direction.

Other roles mentioned in the options do not accurately reflect the typical function of LPs in private equity. For instance, actively managing investment decisions, serving as legal advisors, or handling day-to-day operations are tasks that fall primarily under the purview of General Partners and not Limited Partners. This delineation is crucial for maintaining the limited liability that LPs enjoy, which is one of the fundamental principles of investing in private equity.