Typically, the LPA distinguishes them by **what the money is used for** and **when the investment right exists**:
- **During the Investment Period:** the GP can usually make **new platform investments** freely within the fund strategy.
- **After the Investment Period ends:** the GP is usually limited to:
- **follow-on investments** in existing portfolio companies
- **protective investments**
- completing commitments or transactions **approved / initiated earlier**
Best practice is for the LPA to **define “follow-on” and “protective” investment clearly** and set any **reserve, concentration, or approval limits**, so LPs know post-period capital won’t be used for entirely new deals.
Reference:
- https://decilehub.com/base/1-general_questions/163971-how-much-discretion-should-the-gp-retain-regarding-follow-on-investments-reserves-and-investments-made-after-the-primary-investment-period
- **During the Investment Period:** the GP can usually make **new platform investments** freely within the fund strategy.
- **After the Investment Period ends:** the GP is usually limited to:
- **follow-on investments** in existing portfolio companies
- **protective investments**
- completing commitments or transactions **approved / initiated earlier**
Best practice is for the LPA to **define “follow-on” and “protective” investment clearly** and set any **reserve, concentration, or approval limits**, so LPs know post-period capital won’t be used for entirely new deals.
Reference:
- https://decilehub.com/base/1-general_questions/163971-how-much-discretion-should-the-gp-retain-regarding-follow-on-investments-reserves-and-investments-made-after-the-primary-investment-period