The following statements are true of private-equity partnership agreements:
I.The partnership agreement has a limited term, typically 10 years or less.
II.The general partners get a management fee plus carried interest in 20% of any profits earned by the partnership.
III.The limited partners get paid off first, but they get only 80% of any further returns.
IV.The general partners can reinvest the limited partners' money.
A)I and II only
B)I, II, and III only
C)I, II, III, and IV
D)II and III only

Question

Quizplus · Accepted Answer

Statement I is true, as private-equity partnership agreements typically have a limited term of 10 years or less. Statement II is also true, as general partners receive a management fee and carried interest in 20% of any profits earned by the partnership. Statement III is also true, as limited partners are paid off first but only receive 80% of any additional returns. However, Statement IV is false because the general partners cannot reinvest limited partners' money without their consent. Therefore, the correct choice(s) are I, II, and III.

The Following Statements Are True of Private-Equity Partnership Agreements