LP advisory committee
A small group of LPs that advises the fund on conflicts and key decisions.
The LPAC does not run the fund. It reviews conflicts of interest, approves certain waivers and sometimes weighs in on valuation. Seats normally go to the larger or earliest investors.
A typical LPAC has three to seven members, appointed by the GP from among the larger or earlier LPs, and meets once or twice a year plus whenever a conflict needs approval. Members do not owe duties to other LPs in most LPAs and are protected from liability for their role.
Matters commonly brought to the LPAC include cross-fund investments, transactions with affiliates, extensions to the fund's term or investment period, valuation methodology and waivers of investment limits. Industry guidance from LP associations recommends clear LPAC procedures written into the LPA.
Worked example
Fund I wants to invest $4M in a company that the GP's previous fund already owns. Because the deal involves a conflict between two vehicles the GP manages, the LPA requires LPAC consent. The GP shares a third-party valuation, the five LPAC members vote, and four approve the investment.
Common questions about LPAC
Who sits on an LPAC?
Usually representatives of the larger or earliest LPs, chosen by the GP. Anchor investors commonly receive a seat as part of their terms.
Can the LPAC overrule the GP?
Not on investment decisions. The LPAC's power is limited to what the LPA gives it, typically approving conflicts and certain waivers. It advises and consents rather than manages the fund.