Changing Landscapes: A Comparison of the 2011 ILPA Principles with the 2009 ILPA Principles

Abstract

The Institutional Limited Partners Association (ILPA) released Version 2.0 of its Private Equity Principles (the “2011 Principles”), offering a revised version of ILPA’s take on the best practices in establishing private equity partnerships between limited partners (LPs) and fund sponsors (GPs). This article summarizes the changes from the 2009 ILPA Principles issued in September 2009 that we believe are of particular interest and importance to fund sponsors and LPs. Like the 2009 Principles, the 2011 Principles continue to focus on three guiding principles for developing effective partnership agreements: 1) alignment of interest between GPs and LPs/economics, 2) fund governance, and 3) transparency to LPs. The 2011 Principles also include an updated Appendix A describing the role and best practices of the LP Advisory Committee (LPAC) and two new appendices that cover terms and best practices relating to clawbacks and financial reporting. Finally, the 2011 Principles also feature a sample reporting template for capital call and distribution notices, which is one of five standardized templates that ILPA is developing in consultation with fund GPs. In preparing the 2011 Principles, it appears that ILPA sought to incorporate a level of perspective and market reality that many observers thought was lacking in the 2009 Principles (even in light of the more LP-favorable fundraising environment).