What is an LPA?

The LPA is negotiated between the sponsor’s counsel and prospective investors before the first close, usually starting from the sponsor’s draft and the private placement memorandum. Later closers sign on to the same terms. Side letters adjust it for individual investors, and amendments typically require a stated percentage of investors by interest. It is often confused with the subscription agreement, which only covers an investor’s admission.

Say an investor wants to know whether a fund may borrow more than 15% of its commitments. The answer is in the LPA, and changing it usually needs investors’ approval.

Almost every argument about a fund’s terms ends in this document.