ILPA Model LPA Faces Sizable GP Skepticism En Route to Becoming a Fixture in PE Fund LPA Negotiations (Part Three of Three)

Negotiations between limited partners (LPs) and general partners (GPs) over PE fund limited partnership agreement (LPA) terms are often tense, with each party ambiguously pointing to “market” terms to support its position. The Institutional Limited Partners Association (ILPA) recently attempted to level the playing field by drafting a model LPA (Model LPA) for parties to use in those negotiations. While ILPA hopes the Model LPA will empower LPs and improve the PE industry as a whole, the document’s release has been met with skepticism by GPs. In this third article in a three-part series, the Private Equity Law Report interviewed representatives of LPs and GPs on the desired, and likely, effect of the Model LPA, including its potential to reduce the cost and time spent negotiating side letters. The first article examined various Model LPA provisions aimed at increasing GP accountability, expanding GP fiduciary duties and improving the governance of PE funds. The second article addressed attempts in the Model LPA to reallocate certain economic risks from LPs to GPs. For coverage of recent trends in PE fund terms, see “Dechert and Mergermarket 2020 PE Outlook: Identifying Investment and Exit Strategy Trends (Part One of Two)” (Dec. 10, 2019); and “Investors Demand Variations to PE Management Fees and Distribution Waterfalls (Part One of Two)” (Apr. 16, 2019).

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