LPACs still undergoing evolution, panel says

At Dechert’s Global Alternative Funds Symposium, managers and lawyers shed light on the changing role of the LP advisory committee.

For some European investors, joining a fund’s LP advisory committee (LPAC) is of little interest, according to one fund manager who recently wrapped fundraising for a Europe-focused offering. On a panel at Dechert’s Global Alternative Fund Symposium, a London-based lawyer agreed with the GP, saying his clients have recently experienced difficulty filling the LP committee.

“LPACs are a schizophrenic beast,” he noted, adding that while some European LPs are still eager to join the committee, others are worried that the position taints their limited liability.

In Asia, however, the opportunity to join the LPAC still remains a “massive bargaining tool” and is used as a “carrot” to get big investors into funds, noted a Singapore-based lawyer on the panel. In a recent fund he worked on, the interest in the LPAC was so great, the LP could have filled the allotted spots two or three times over. Unlike their European counterparts, Asian LPs aren’t worried about the position comprising their limited liability.

LPACs may be undergoing this evolution in Europe as fund documents become more transparent and detailed, the fund manager noted. “Many of the decisions LPACS used to make are now in the fund documents,” she said.

Restrictions like investment diversification limits and leverage limits have now worked their way into the written agreements, meaning the LPAC no longer has to weigh in on those decisions.