ILPA’s ‘model LPA’: What you need to know

A first look at the details of the Institutional Limited Partners Association's example LP agreement with reflections from the group's senior policy counsel Chris Hayes.

ILPA has published a free-to-use ‘model’ limited partnership agreement – a dummy legal contract (full story here). As ILPA’s legal lead Chris Hayes tells Private Funds CFO in this podcast, you previously couldn’t just Google “LPA” and find a draft document to use as a starting point; well now you can. ILPA’s hope is that investors and managers can use it as a benchmarking and negotiating tool, thereby cutting down on negotiation and side letter activity and, ultimately, cost.

Given the initiative is investor-driven, the agreement is understandably LP-friendly. Indeed, it comes with a European-style whole-of-fund waterfall. This may prove a turn-off for some GPs, given more than two-thirds of US managers are using deal-by-deal models, according to MJ Hudson’s latest fund terms research. ILPA plans to release a second version with a deal-by-deal waterfall.

This is a positive step for transparency in PE investing. I’d love to hear your thoughts:

Email prepared by Toby Mitchenall.