Compliance for GP-Stakes Funds: Affiliate Transaction Rules, Information Barriers, and Regulatory Coordination

GP-stakes fund compliance addresses unique challenges from affiliate relationships with portfolio GPs creating potential conflicts, information barriers preventing misuse of confidential business information, cross-fund investment restrictions when affiliated with portfolio GPs' underlying funds, and regulatory coordination ensuring both GP-stakes fund and portfolio GP compliance obligations are met. Compliance programs balance partnership collaboration with appropriate separation protecting all stakeholders.

Affiliate Transaction Management

Owning stakes in GP management companies creates affiliate relationships requiring conflict management. Key considerations include co-investment opportunities in portfolio GP funds requiring fairness opinions or independent committee approval, service provider relationships avoiding self-dealing when portfolio GPs use affiliated vendors, and allocation decisions ensuring equitable treatment when multiple affiliated funds compete for opportunities. The compliance team establishes procedures governing affiliated transactions including independent review requirements, disclosure obligations, and documentation standards demonstrating fairness. Transparent processes protect against conflicts while enabling beneficial collaboration.

Information Barriers and Confidentiality

Access to portfolio GP business information including fundraising activities, fund performance, strategic plans, and portfolio company details requires strict confidentiality protection. Information barriers prevent inappropriate sharing including separation between investment team members working on different portfolio GPs, restricted access to confidential information on need-to-know basis, monitoring communication between investment staff and portfolio GPs, and prohibitions on using confidential information for other investment activities. The compliance officer ensures information barriers are effective through regular training, access controls, and periodic audits of information sharing practices.

Regulatory Coordination

GP-stakes investors must coordinate regulatory obligations with portfolio GPs. Considerations include SEC registration as investment advisers potentially creating examination coordination needs, ownership thresholds triggering control or affiliate status affecting regulatory obligations, ERISA considerations when GP-stakes funds are controlled by ERISA assets, and international regulatory requirements when portfolio GPs operate globally. The compliance team maintains communication with portfolio GP compliance functions ensuring regulatory developments affecting either party are appropriately addressed and coordinated responses to examinations or inquiries are implemented.

Key Takeaways

• Affiliate transactions require careful oversight: Co-investments, service relationships, and allocation decisions involving affiliated portfolio GPs demand independent review and documentation.
• Information barriers protect confidentiality: Access to portfolio GP business information requires strict controls preventing misuse and protecting competitive interests.
• Ownership creates regulatory coordination needs: GP-stakes positions may trigger affiliate status requiring coordination on examinations, filings, and compliance obligations.
• Transparency builds trust: Clear disclosure of affiliate relationships and conflict management procedures demonstrates commitment to protecting all stakeholder interests.