What Due Diligence Should I Run on a Fund Manager Before I Invest as an LP?

You’ve reviewed the fund presentation.

The investment strategy sounds compelling, the past returns look impressive, and the general partner seems experienced.

Now you’re being asked to commit capital to a fund that may last 10 years or longer.

Once you sign the subscription agreement, walking away is no longer an option.

That’s why experienced limited partners (LPs) spend as much time evaluating the fund manager as they do evaluating the investment strategy. A strong presentation is only the starting point. Before committing capital, investors should verify both the manager’s investment ability and the operational systems that will protect their investment throughout the life of the fund.

LP Due Diligence Has Two Separate Goals

Fund manager due diligence generally falls into two categories.

The first evaluates whether the manager has the ability to generate attractive investment returns.

The second examines whether the fund is operated with the governance, controls, and infrastructure expected of a professional investment manager.

A manager should perform well in both areas.

Strong returns cannot compensate for weak operational controls, and excellent operations cannot overcome a poor investment strategy.

Verify the Investment Track Record

Marketing materials often present summary performance statistics, but those figures rarely tell the complete story.

Instead of relying only on a blended internal rate of return (IRR), investors should request a deal-by-deal breakdown that clearly explains how previous returns were generated.

Important information typically includes:

• Each investment’s entry date and purchase amount.
• Follow-on investments and total capital invested.
• Exit date and realized proceeds.
• Net IRR for each investment.
• The manager’s specific role in sourcing and managing the investment.

Historical performance should also be viewed with appropriate caution. Only 19% of top-quartile buyout funds repeat top-quartile performance in their next fund. Past success does not guarantee future results.

Evaluate the Fund’s Operational Controls

Operational due diligence receives less attention than investment performance, but it is equally important.

This review focuses on how the fund is managed rather than which investments it makes. Areas worth reviewing include:

• Whether the fund uses an independent fund administrator.
• A documented valuation policy.
• A compliance manual and Form ADV status, where applicable.
• Cybersecurity procedures.
• Appropriate insurance coverage.

An estimated 87% of LPs rejected a manager during 2026 because of operational concerns, demonstrating how important these controls have become.

Speak With References Beyond the Manager’s List

References often reveal information that does not appear in a marketing presentation.

Rather than relying only on contacts selected by the fund manager, investors should try to speak with founders, portfolio company executives, or other investors who experienced both successful and unsuccessful investments.

Discussions about difficult situations such as down rounds, portfolio challenges, or unsuccessful exits, often provide a better understanding of how the manager communicates, supports portfolio companies, and makes decisions during periods of stress.

Understand Key-Person Risk

A fund’s historical performance is often associated with one or two senior investment professionals.

Before investing, LPs should determine whether those individuals will continue managing the current fund.

Reviewing the key-person clause, team stability, succession planning, and each partner’s responsibilities can provide valuable insight into how the fund would operate if an important team member departed before the fund reached maturity.

This analysis becomes particularly important for long-duration venture capital and private equity funds.

Compare Fees and Fund Terms

Investment performance should not be evaluated in isolation. LPs should also compare the fund’s economic terms against current market standards.

Management fees, carried interest, reporting obligations, governance provisions, and other partnership terms should be reviewed alongside recognized market guidance, such as ILPA recommendations where appropriate.

Understanding how a fund differs from standard market practice allows investors to identify unusual provisions before making a long-term commitment.

Common Founder Mistakes

• Accepting a marketing presentation without verifying the underlying investments: A blended IRR provides only part of the picture. Reviewing each investment individually helps distinguish consistent performance from one exceptional exit.
• Focusing only on returns while overlooking operational controls: Independent fund administration, valuation policies, compliance procedures, cybersecurity, and insurance all contribute to the long-term protection of investor capital.
• Speaking only with references selected by the fund manager: Conversations with founders and investors who experienced difficult portfolio situations often provide a more balanced assessment of how the manager performs over an entire fund lifecycle.
• Ignoring key-person risk before committing capital: Understanding who generated the historical track record, who will manage the current fund, and how the key-person clause operates can reduce unexpected risks during a 10-year investment.

10-Minute Fund Manager Due Diligence Self Check

• Have I reviewed a deal-by-deal investment track record rather than only a blended IRR?
• Does the fund have an independent administrator and appropriate operational controls?
• Have I reviewed the valuation policy and compliance procedures?
• Have I spoken with references beyond those selected by the GP?
• Do I understand the key-person clause and succession plan?
• Have I compared the fund’s fees and partnership terms with current market standards?

If you cannot answer yes to all of these, you are not ready to sign the subscription agreement yet.

Bottom Line

Choosing a fund manager is a long-term decision that extends far beyond reviewing investment returns. Careful due diligence should evaluate both the manager’s investment record and the operational systems supporting the fund. By verifying historical performance, reviewing governance and compliance practices, understanding key-person risk, and speaking with independent references, LPs can make more informed investment decisions before committing capital for the next decade.

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