Client Alert
ILPA Private Equity Principles
March 08, 2010
Siobhan Burke, Rob Carlson, and Stanley Liu
While the pace of private equity capital-raising has slowed dramatically over the last year, there has been an enhanced focus on fund terms by private equity fund investors (Limited Partners). In September 2009, the Institutional Limited Partners Association (the ILPA) , a private equity industry association, published a set of principles, the ILPA Private Equity Principles, that is intended to restore and strengthen the alignment of interest between Limited Partners and their private equity fund sponsors (General Partners). The concepts proposed by the ILPA are suggested best practices and are intended to serve as a basis for discussion between General Partners and the Limited Partners. In addition, Appendix A to the ILPA Private Equity Principles sets forth certain private equity preferred terms, and Appendix B sets forth certain recommended practices and duties of Limited Partner advisory committees. General Partners are not bound by these concepts but we expect that the Limited Partners will use (and in fact are using) them as a benchmark during any negotiation they will have with the General Partners. The principles were developed through the collaborative efforts of many institutional private equity investors and their senior investment officers, the ILPA, and the Private Equity Principles and Best Practices Committee of the Board of Directors of the ILPA.
The ILPA Private Equity Principles focus on three principal objectives: (i) alignment of interests between General Partners and Limited Partners, (ii) General Partner governance, and (iii) transparency to Limited Partners. Set forth below is a summary of the ILPA Private Equity Principles, together with a selection of preferred private equity terms from Appendix A and recommended practices from Appendix B to the ILPA Private Equity Principles which support the relevant principles.