General Partner Operating Agreement
(Hedge Fund) (DE LLC)

Summary

The operating agreement is the legal agreement for the limited liability company that acts as the general partner to a hedge fund organized as a limited partnership. This operating agreement assumes that the hedge fund general partner is a Delaware entity, as is commonly the case for domestic hedge fund managers. The members of the limited liability company would be the founders and other senior personnel at the hedge fund manager. Agreements like this are highly customized to reflect the specific understanding among the principals of the hedge fund manager. However, some rough generalizations can be maintained. Unlike a professional service partnership agreement (like that for an accounting firm or law firm), in a typical hedge fund manager, there are usually one or two founding and leading professionals (known as the managing members) who retain a permanent equity stake in the firm that cannot be involuntarily reduced and who admit senior personnel as equity owners (known as the non-managing or ordinary members) on a limited basis and contingent on the continued satisfactory performance of their duties. This form agreement attempts to illustrate that model, but again, counsel should be mindful to draft the operating agreement to meet the specific circumstances of the hedge fund manager. This template includes practical guidance, drafting notes, and alternate clauses. For additional hedge fund formation resources, see: • Hedge Fund and Its Offering: Drafting and Reviewing the Key Documentation • Hedge Funds Structure and Organization • Private Placement Memorandum (Hedge Fund Limited Partnership Interests) (DE) • Private Investment Fund/ Hedge Fund Investor Questionnaire