Governance
Side Letter
A bilateral agreement between an LP and the GP that grants rights and protections beyond the LPA.
Side letters are how LPs negotiate fee economics, transfer rights, key-person provisions, ESG carve-outs, MFN clauses, reporting cadence, regulatory representations, and dozens of other bespoke terms. A mature LP program will have hundreds of active side-letter rights spread across funds.
The operational risk is straightforward: rights you cannot find are rights you cannot exercise. Audit failures and missed MFN elections almost always trace back to side letters that were filed and forgotten.
Best practice is a living obligations registry that maps every side-letter clause to a triggering event, an owner, and an evidence trail.