Ontra is launching a feature that digitizes LPs’ most-favored-nation elections, which is being included in its Insight workflow platform for GPs.
The contract automation provider said its update enables users to turn side letters into digital agreements; create MFN election forms with specific disclosures and provisions; examine elections; and manage obligations.
The new feature is designed to help GPs work with their counsel across the processes.
A spokesperson said that parts of the feature are immediately available, while others will be deployed into the first quarter of next year.
MFN processes for sponsors are “quite onerous,” said Nat Kunes, Ontra’s chief product officer. He told Private Funds CFO that GPs need to include MFN components in order to get business from large, institutional LPs. But he noted how complicated this can be, because a sponsor offering favorable terms to a given LP must go back to other LPs with which it granted MFN components and offer them a chance to participate.
GPs also have to track obligations and work with both internal and external counsel, Kunes said. And these steps are costly for funds. “There’s a time component to it and it runs up expenses on the fund,” he said, noting that keeping costs lower helps with fund returns.
In contrast, Kunes noted that Ontra handles MFN work on behalf of sponsors. “This allows them to automate the entire process,” he said.
Discussing examples, the product chief said the company automatically issues MFN election forms to investors and allows for them to make their elections online. The software also generates workflows tied to MFN obligations, which are assigned to designated people at GPs to complete.
Ontra, which counts Blackstone among its investors, launched Insight in 2020. Kunes said that developing the MFN feature was complicated because it involved making a workflow that is distributed to LPs and is easy to use.
The feature can also help sponsors in complying with the SEC’s new private funds rule, Kunes said, citing the portion that requires GPs to disclose preferential fund terms to all LPs in the vehicle. However, he explained that traditional MFN processes remain relevant because the rule does not require GPs to offer all investors participation in those terms.
And the feature can help GPs with their fundraising, Kunes said. He explained that it can speed up fund closures, and that its cost savings can make funds more attractive to would-be investors.