Every LP in a fund signs the same Limited Partnership Agreement. What they don't all sign is the same side letter. Gurpreet S. Bal, who has represented both emerging managers and institutional LPs in fund formations, puts it plainly: "The LPA is the public menu. The side letter is what the large investor actually ordered. If you want to know the real terms of a fund, you need to read the side letters — and most people never see them."
His practice covers the full formation stack, from first close through final close, and he has negotiated the provisions that matter most: key person triggers, removal rights, co-investment access, and the MFN clauses that quietly spread favorable terms across the LP base.
A key person provision names the individuals whose continued involvement is essential to the fund's strategy — typically the founding partners. If a key person ceases to devote substantially all of their professional time to the fund, the provision triggers, usually suspending the GP's ability to make new investments until a specified percentage of LPs vote to lift the suspension or remove the GP. The threshold matters enormously. "Substantially all" is vague by design, and GPs fight hard to preserve flexibility. Gurpreet Bal has seen LPs push for "majority" time thresholds that are genuinely enforceable, while GPs prefer language that gives them room to join boards, advise other funds, or transition without triggering a technical default. The key person clause is the LP's primary structural protection against a team change, and it is often the hardest provision to negotiate.
The most powerful LP protection in an LPA is the removal right — the ability to terminate the GP, with or without cause, upon a vote of a specified percentage of LP interests. For-cause removal is standard; no-fault removal is not. A no-fault removal right (often requiring a 75% or higher LP vote) is a significant concession by the GP because it means the fund's governance structure is ultimately controlled by the investors, not the manager. In practice, no-fault removal is rarely exercised, but its existence shapes GP behavior throughout the fund's life. Less sophisticated first-time managers sometimes agree to removal provisions they don't fully understand during a hot fundraising environment — and discover the implications when LP relations deteriorate.
Larger LPs routinely negotiate co-investment rights as a condition of their commitment. A co-investment right gives the LP the opportunity to invest alongside the fund in specific portfolio companies, typically on the same terms and without management fees or carried interest. The economics are compelling: LPs get direct exposure to the best opportunities at institutional pricing. For GPs, co-investment rights can enhance LP relationships and increase total deployed capital, but they create allocation obligations that are hard to manage fairly as the LP base grows. The LPA will specify whether co-investment is a right or a courtesy, and the side letter will often set a specific dollar amount or percentage the GP must offer. Gurpreet Bal regularly negotiates these provisions for both sides, and the key issue is always priority — who gets offered the opportunity first when the deal is oversubscribed.
As a fund closes, each institutional LP negotiates its own side letter. A most-favored-nation (MFN) clause in a side letter entitles that LP to elect the best terms granted to any other LP. In theory, this keeps the playing field fair. In practice, it creates a complex web of cross-references that can be nearly impossible to administer consistently. By the time a fund has closed with fifteen institutional LPs, each with a side letter and an MFN right, the GP's compliance obligation is substantial. Some provisions are excluded from MFN (ERISA-specific accommodations, for example), but figuring out which LP is entitled to elect which terms requires ongoing tracking. New fund managers routinely underestimate this administrative burden. The side letter that felt like a small concession to close a large commitment can, over time, become the most time-consuming document in the fund.
Gurpreet S. Bal is a corporate partner with 16 years advising on private equity, merger transactions, and public offerings for companies and investors at three of the world's top law firms. He has represented clients in hundreds of transactions with aggregate deal value exceeding $60 billion across AI, semiconductors, fintech, and emerging technology. For more information and to get in touch, visit gurpreetbal.com.