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Private Fund Side Letters: Negotiating and Drafting Key Terms, Financing and Other Concerns

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
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Conducted on Tuesday, July 18, 2023

Recorded event now available

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This CLE course will discuss the documentation of side letters between private fund managers and investment partners who need or demand terms that may vary from the underlying partnership agreement. The panel will examine most favored nation (MFN) clauses, transfer rights, excusal rights, special reporting provisions, and other terms common to these arrangements. The panel will also discuss the potential administrative and legal ramifications of side letters that fund sponsors must consider before entering into side letters.


Private fund side letters grant exclusive rights and privileges that modify the terms of a fund's partnership agreement. They are used increasingly in the fund formation process, often provided to seed or strategic investors, employees, friends, and family, to accommodate last-minute requests on the eve of the initial closing or to address the needs of limited partners participating in subsequent closings without amending the partnership agreement.

Many prospective limited partners will negotiate MFN provisions that permit the election of any benefits granted to other limited partners. MFN rights can significantly extend the fund's obligations. Fund managers and their counsel must determine whether an investor's terms are captured by MFN provisions when negotiating a side letter.

Other standard provisions may include transfer rights, excusal rights, limitations on fees, redemption rights, a notice of redemptions by other investors, additional reps and warranties, additional due diligence or inspection rights, and enhanced reporting obligations. Counsel must ensure that such provisions are commercially appropriate and operationally practical for the fund and its manager. Counsel must consider side letters in the context of any credit facilities or co-investment arrangements.

Listen as our authoritative panel discusses the provisions typically found in private fund side letters, the motivations behind limited partner requests for side letters, and the potential legal and administrative issues they present for fund managers.



  1. Introduction to side letters and circumstances under which they arise
  2. Common terms
    1. MFN
    2. Transfers
    3. Excusal rights
    4. Enhanced reporting
    5. Other
  3. Factors to consider in a negotiation
    1. Co-investments
    2. Credit facilities
    3. Regulatory concerns
    4. Impact on fund management: need for consistency


The panel will review these and other critical issues:

  • When are side letters typically requested in a fund-raise and why are they often preferable to an amendment of the partnership agreement?
  • How do MFN rights impact the ability of the fund manager to negotiate side letters?
  • What are the most common points of contention concerning transfer rights? Excusal rights? Increased reporting obligations?
  • Why is an understanding of any existing or future fund financing arrangements necessary when entering into side letters?


Goldman, Adam
Adam S. Goldman

Vedder Price

Mr. Goldman focuses his practice on legal and compliance matters for investment advisers and unregistered investment...  |  Read More

Posthuma, Matthew
Matthew (Matt) Posthuma

Ropes & Gray

Mr. Posthuma is a partner in Ropes & Gray’s private investment funds group in Chicago who focuses on the...  |  Read More

Tope, Adam
Adam S. Tope

DLA Piper LLP (US)

Mr. Tope provides investment fund sponsors, investors and principals with creative, commercial and realistic advice...  |  Read More

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