With the U.S. Securities and Exchange Commission’s current scrutiny of private equity firms, the relationship between general partners (GPs) and their investors, or limited partners (LPs), continues to evolve. Among thetopics dominating discussions about limited partnership agreements(LPAs) are: co-investments; fees; operational 

due diligence; and environmental, social and governance (ESG) concerns. 

To explore the issues, ACG New York Women of Leadership convened a panel at the group’s Second Annual Summit, held at the Time Life 

building in New York on Jan. 22. Panelists included Bronwyn Bailey (top right) of the Private Equity Growth Capital Council, Lindsay Creedon (second) of StepStone, Kristin Custar (third) of the Jordan Co., Amy Harsch (fourth) of American Securities, and Meredith Rerisi (bottom) of Abbott 

Capital. Here are the four most-pressing concerns:

1.       Co-investments

LP interest in co-investing is up, panelists say. Co-investing hasbecome one of the most talked-about topics in LPA negotiations. Some investors are looking for a first look at co-investment 

opportunities. The process around co-investing is expected to be influenced by the U.S. Securities and Exchange Commission, which has been asking GPs to provide more documentation. The SEC is asking funds questions, including: How did you pick the people involved? Did you offer it to everyone? Was it fair?

2.       Fee Discounts

Large investors committing to participating in funds early with big dollar amounts are looking for discounts on fees. Some will commit the money before the fund has launched and then ask for special terms.

3.       Operational Due Diligence

Potential partners and existing LPs are looking to get to know the private equity team they are working with in an in-depth way, and they are asking more frequently for operational due diligence. Operational due diligence includes discovery surrounding how the firm manages risk, capital calls, the signatory process, banks, disaster recovery plans and how money is moved. These days, it's often simply considered part of the conversation between GPs and LPs. 

4.       ESG Policies

PE firms are receiving more inquiries ESG policies. Many GPs, especially those from Europe, are placing emphasis on investing in 

funds they deem ESG proficient. ESG issues are expected to gain more traction in the coming years. One challenge for middle-market firms is that they don’t have personnel dedicated to ESG issues, and that isn't expected to change. For more on ESG policies, see More Dealmakers Ponder ESG Factors. For information on ACG New York Women of Leadership's first summit, see Private Equity Investors May Want to Pitch Nanette Lepore and watch More Women Likely to Emerge As Mid-Market Leaders. than previously. 

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