Side Letter for a Private Equity Fund

Summary

This side letter template is to be used when forming a private equity fund. The side letter between an investor and the general partner (on behalf of the PE fund) will include certain terms that are specifically agreed upon by the parties in addition to the terms and provisions contained in the partnership agreement, subscription agreement, and management agreements. This template contains practical guidance and drafting notes. Side letter terms may include preferential economic terms, certain regulatory terms required by the investor, country-specific terms, as well as numerous other terms and provisions that the investor may desire, or require, prior to making an investment in the fund. Depending on the type of investor and the investor's commercial and regulatory needs, a large number and variety of provisions may be necessary. Counsel for an investor should be familiar with the investor's investment policies, regulatory requirements and preferences for investor rights and fund reporting before submitting side letter provision requests and negotiating a side letter. The side letter provisions below represent some of the most common provisions requested by investors. If the private equity fund has a large number of investors, particularly institutional investors, fund counsel may draft template side letter provisions that address each issue using the general partner's preferred language and terms. This helps to standardize the side letter process, and ensures that each provision is consistent in the many side letters between the fund and its investors. The side letter will typically be addressed to the investor and executed by the investor and the general partner. Certain defined terms (capitalized in this template and/or in the drafting notes) not defined herein, appear in the Limited Partnership Agreement for a Private Equity Fund. For a full listing of related first year associate investment management content, see First Year Associate Resource Kit: Investment Management.