(FORTUNE Magazine) – THAT SOURING limited partnership you bought a few years ago once seemed a pretty sweet deal. Your financial planner recommended the program, and George down at the bank thought it looked sound. Now you are stuck with a $20,000 investment that produces nothing but paperwork. ''The next time I buy a partnership,'' you say to yourself, ''I am going to check it out so thoroughly that I know the name of the general partner's dog.'' Good luck. Figuring the ins and outs of a public limited partnership is so tough that it leaves even many professionals scratching their heads. Prospectuses are miles thick. Performance records of sponsors are often misleading. Financial reporting is scant. But don't give up: Experts say that besides consulting the handful of services that analyze limited partnerships, you can take several other steps to remove some of the mystery from investing in one. To begin with, when your broker or financial planner suggests that you buy a program, ask yourself whether you really need one. The Tax Reform Act of 1986 eliminated most of the tax-sheltering characteristics of partnerships, so tax avoidance is scant reason to buy. In the good old days investors could deduct partnership losses from other sources of income. Now so-called passive losses can be used only to offset passive gains, or gains from other partnerships. Today investors usually buy partnerships for the same reasons they purchase stocks and bonds: for the promise of income or capital gains, or both. But unlike traditional securities, partnerships are generally direct investments in businesses such as oil and gas or real estate, and they are not publicly traded. Most require a minimum investment of $2,000 to $5,000. Nowadays it makes sense to own a limited partnership only if you feel the need to diversify beyond stocks and bonds. Real estate limited partnerships can protect against inflation. Oil and gas programs would be a good bet if the price of crude jumps. High-risk ventures in everything from Broadway shows to pay telephones can occasionally provide spectacular returns. Most financial planners and brokers offer several kinds of partnerships. Make sure your planner or broker gives you the details on all the deals he is pitching. EXPERTS SAY the most important information you need about a partnership is the name of the sponsor, or general partner (the investors are limited ; partners). ''It may sound like hackneyed advice, but you want to invest with someone who has done it before,'' says Robert Stanger, chairman of Robert A. Stanger Co., a partnership-rating service in Shrewsbury, New Jersey. Sponsors such as JMB and Balcor in Chicago, Integrated Resources in New York, Krupp in Boston, and the major brokerage firms are all experienced players. Stanger believes big is usually better. ''Look for someone with $500 million under management,'' he says. ''There is no reason to back a startup operation.'' Also, be sure the sponsor has experience with the type of deal he is selling you. A company that has cleaned up in commercial real estate may fall on its face in retirement housing. Examining the sponsor's record is a must. The problem is that performance figures can be suspect since they are often incomplete or manipulated to appear better than they are. Because the Securities and Exchange Commission and other regulators do not require partnerships to publish the value of their assets, judging capital gains accurately is difficult. Still, says Thomas Fendrich, a managing director of Standard & Poor's, ''by looking in the prospectus you can get a general idea of how the sponsor's other programs are doing.'' After you check the sponsors, focus on the partnerships themselves. Your first step here is to figure out how much risk you will be taking. Limited partnerships cover a wide spectrum of risks, from speculative commodity pools to certain types of less treacherous real estate deals. Says Paul Green, president of Southport Advisors, a Connecticut firm that evaluates limited partnerships: ''A few partnerships are as safe as preferred stock or government bonds. Others unquestionably fall into the wild and woolly category.'' Green has created a chart that investors can use to compare the risks of partnerships with those of traditional securities (see page 148). Each partnership has characteristics that increase or decrease risks. For instance, many sponsors use leverage, which enhances prospective returns but also increases risk. Green believes investing in a real estate partnership that borrows up to 50% of the value of its assets may be smart. Reason: The potential returns that a moderate amount of leverage produces when asset values are rising tend to outweigh any underperformance in a down market. Ask if the general partner has actually bought any assets yet. If not, the partnership could be more hazardous than one that already owns assets, since you don't know exactly what the general partner will acquire. Also, find out how diversified the partnership is. Obviously, a real estate deal with 15 properties across the U.S. is safer than one with a single tower in Denver. THE TOUGHEST PART of analyzing a limited partnership is examining its offering terms, which consist of the front-end, operating, and back-end fees, plus the general partner-limited partner split. Comparing one partnership's offering terms with another's is too complicated for the average investor. But there are some general rules. Try to choose a deal with a low front-end fee: 20% or less of your investment. A high front-end fee hurts more than operating or back-end fees because it means you have less money working for you from the start. Says Steven Bleier, president of Diversified Financial Management of White Plains, New York, a company that analyzes partnerships: ''With a little digging, an investor can usually tell whether the general partner is giving the limited partner a fair shake.'' Some other helpful tips: -- Choose oil and gas programs where the general partner gets most of his compensation at the end. You don't want him stuffing his pockets unless your well is a winner. -- In cable TV and real estate partnerships, pay close attention to front-end fees, which can climb to 25% of your investment. -- Avoid equipment-leasing deals where operating fees exceed 12% annually. After taking all these precautions, consult Robert Stanger's ratings of offering terms in the Stanger Register, a $245-per-year monthly with rankings and other pertinent information on all partnerships open to investors at the time. (Single copies are available for $60 from 1129 Broad Street, Shrewsbury, New Jersey 07702.) Stanger does a computer analysis of deals to determine how much of the investor's dollar is left after all fees, expenses, and splits. He considers partnerships where 80 cents or more of the investor's dollar goes to work to be superior. Stanger calculates this figure for each of the partnerships he analyzes and assigns the partnerships letter-grade ratings similar to those for bonds, with AAA+ being the best. A stellar offering-terms rating does not ensure a star performance, but, says Stanger, ''all other things being equal, a partnership with a higher ranking will return more than one with a low ranking.'' To illustrate his point, he analyzed two real estate partnerships, one rated AAA+, the other A+. Both had identical portfolios and differed only in offering terms. After ten years investors who had put up $10,000 netted $24,519 from the AAA+ deal and $19,633 from the A+ program -- a 25% difference. Currently Stanger gives an AAA rating to BRAUVIN HIGH YIELD FUND III, a low-risk real estate partnership investing in commercial leases, managed by Brauvin Realty of Chicago (312-443-0922). He also gives a triple A rating to PAINE WEBBER EQUITY PARTNERS III, a $150 million program that will buy residential and commercial property. It is available through Paine Webber brokers. Many analysts think now is the wrong time to invest in oil exploration programs. With the Iran-Iraq war apparently winding down, the price of oil is unlikely to gush up tomorrow. Few oil and gas partnerships do well by Stanger's lights, because the general partners seem to take more of the investor's dollar than they do in real estate deals. But you might want to consider a partnership that derives income from proven reserves. PRUDENTIAL- BACHE ENERGY INCOME PARTNERSHIP SERIES V, a $200 million program available through Pru-Bache, rates AA. Stanger calculates that annual cash distributions for all Pru-Bache oil and gas income partnerships from 1983 through 1986 averaged 9.3%. BEWARE also of general partners in cable TV deals who take large bites out of the limited partners' dollars. Among the more reasonable is JONES SPACELINK INCOME/GROWTH FUND I, sold by Jones Intercable of Denver (303-792-3131). It has raised $883 million for public partnerships over 14 years, using leverage of up to 50% to buy existing networks and build new systems. Stanger gives Jones Spacelink an AA rating on its offering terms. CENCOM CABLE INCOME PARTNERS II, available through Kidder Peabody offices, warrants an AAA rating. In equipment-leasing programs, the general partner buys capital equipment -- computers or airplanes, for example -- and leases it for income. One with AAA offering terms, according to Stanger, is CSA INCOME FUND III, sold by CSA Financial Corp. of Boston (617-482-4671). Returns on many equipment-leasing partnerships during the past decade have been mediocre. One program sponsored by Phoenix Leasing of San Francisco (415-484-4500), Phoenix Leasing Income Fund 1975, returned 203% of its original investment over 12 years. The company, which has raised $548 million since 1973, is currently offering PHOENIX LEASING CASH DISTRIBUTION FUND III, a $100 million partnership that will lease out computer peripherals. Stanger rates its offering terms as AA+. Paul Green of Southport Advisors also finds Phoenix III attractive. Southport publishes the monthly Partnership Record, which lists all publicly available partnerships ($250 per year, single copies $35; Southport Advisors, P.O. Box 682, Southport, Connecticut 06490). Like Stanger, Green does a computer analysis of partnerships, but his offering ratings -- which run from 1 (very favorable) to 3 (less favorable) -- include a subjective judgment of the experience and resources of the general partner. He also ranks deals by their risk, I being lowest, V highest. Almost all fall between III and V. Phoenix III gets a 1.5 offering rating from Green and a IV risk rating. In oil and gas drilling, Green gives an offering rating of 1.5 and a risk rating of V to a $30 million series of programs called EAGLE 88 ROMEO, SIERRA, and TANGO LIMITED PARTNERSHIPS of Oklahoma City (405-843-8066). The general partner, Red Eagle Exploration Co., has a success rate of 95% in its development drilling projects. PARKER & PARSLEY 88 DEVELOPMENT DRILLING PROGRAMS of Midland, Texas (915-683-4768), also rates a 1.5 from Green for its offering terms, and a V for risk. In real estate Green gives SHOPCO REGIONAL MALLS LP a 1.5 offering rating and a risk rating of IV. This $70 million program acquires interests in small regional malls for income and capital gains. The deals are available through Shearson Lehman Hutton, Shopco's general partner. Another good real estate deal, according to Green, is the T. ROWE PRICE REALTY INCOME FUND IV, offered by T. Rowe Price of Baltimore (301-547-2308). This unleveraged program, which will invest in retail, commercial, and industrial properties, gets an offering rating of 1.5 and a risk rating of III+. The partnership will also allow some redemption of units quarterly, providing the investor with a bit of liquidity. Standard & Poor's, famous for its bond-rating service, is just getting into reviewing limited partnerships. It likes a series of deals offered by Franchise Finance Corp. of America, which is headquartered in Phoenix (602-264-9639). The latest in the series, INSURED INCOME PROPERTIES 1988, makes what are known as net leases to fast-food franchises. Under this arrangement the franchisee rents the property, buildings, and equipment from the partnership and assumes all the liabilities of the business. The partnership collects rents from franchises such as Hardee's, Burger King, and Wendy's and passes the income on to investors. ''These franchises provide investors with a stable cash flow of around 10% per year,'' says S&P's Fendrich. His firm characterizes the financial strength of Franchise Finance as ''visibly superior.'' S&P also likes partnerships sponsored by MLH (Merrill Lynch Hubbard, a subsidiary of the giant brokerage). Right now MLH is offering the $150 million ML REAL ESTATE RECOVERY FUND, which buys commercial and residential properties in such depressed areas of the country as Texas. Stanger rates the Recovery Fund as a medium-low risk, even though it buys into turnaround situations. For $3,600 per year, Diversified Financial Management (914-682-2007) will send you Diligence, a database of limited partnership performances that is updated monthly. Diligence ignores risk and ranks partnerships from 1 to 5 strictly on the basis of income and total return to investors. It also crunches numbers to determine how much the general partners get for every dollar the limited partners receive. Bleier says the average take for a general partner is 47 cents vs. $1 for limited partners. He warns investors away from general partners who grab for more. Real estate partnerships sponsored by W.P. Carey of New York City (212-888-7700) get strong reviews from Diligence. ''Their programs have high rankings, and on average the general partners get only 19 cents on the investor's dollar,'' says Bleier. Right now Carey is selling units of CORPORATE PROPERTY ASSOCIATES 8, a $50 million program with 50% leverage that is investing in commercial real estate leases across the country. Bleier also suggests taking a look at partnerships offered by JMB Realty in Chicago (312-440-4800), which has raised $3.6 billion over the past 18 years. JMB, says Bleier, takes just 7 cents for every investor's dollar. Its CARLYLE INCOME PLUS-II will not borrow and is therefore less risky than the leveraged CARLYLE REAL ESTATE-XVII. Also available directly from JMB or through Merrill Lynch brokers is JMB INCOME PROPERTIES XIV, a $100 million program that will use some leverage to buy commercial properties.

CHART: NOT AVAILABLE CREDIT:NO CREDIT CAPTION:THE RISK SPECTRUM IN LIMITED PARTNERSHIPS This chart, designed by Paul Green of Southport Advisors, compares the relative safety of various limited partnerships (upper half of chart) with traditional investments (lower half). Even the soundest partnerships are still medium-risk.