Definition
A key-person provision is a fund clause that triggers a suspension of new investments (and potentially allows limited partners to exit) if specified senior investment professionals leave or reduce their involvement in managing the fund.
Private fund investments are fundamentally bets on people. The track record that persuaded a family to commit capital was built by specific individuals, and the key-person provision is the structural acknowledgment of that reality. Named key persons, usually two to four senior partners, must spend a defined minimum of their professional time on the fund. If they depart, die, become incapacitated, or fall below that threshold, a key-person event is triggered.
The consequences vary by LPA. A typical outcome is an automatic suspension of the fund's ability to make new investments until limited partners vote to lift the suspension or elect a wind-down. Some agreements give LPs the right to remove the general partner with sufficient votes; others simply freeze the fund in place while succession is arranged. The provision rarely forces an immediate return of capital, which is a common misconception.
Families evaluating a fund should read key-person provisions carefully and consider the depth of the investment team below the named individuals. A hypothetical scenario: a family commits to a small growth equity fund anchored around two founders; one departs eighteen months in for a competitor. Without a clear key-person trigger and a responsive LP base, the family may find their capital locked with a diminished team for the remainder of a ten-year fund life. See manager selection considerations for related due diligence questions.
Last reviewed August 25, 2026 · Editorial Policy