HoldCo Builders How I Built My Own Investment Fund Advisory Firm After Leaving a Global Law Firm | Michael Huseby Interview
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Dec 15, 2023 Michael Bjorn Huseby is an investment fund formation attorney at DLA Piper, representing both fund sponsors and investors. He dives into the critical role of side letters and the complexities of waterfall arrangements in investment funds. The conversation highlights why investors avoid novel approaches, instead favoring familiar structures. Huseby shares insights on how GPs can build trust with LPs and addresses the challenges of first-time fund managers, emphasizing the importance of transparency, communication, and adapting to regulatory changes.
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Side Letters Explained
- Side letters allow a fund to provide special terms to individual large investors without changing terms for everyone.
- These can include reduced fees, extra information rights, or excluded investments based on investor preferences.
Side Letter Disclosure And MFN
- GPs must disclose side letters with material terms to LPs under recent SEC rules.
- Most favored nations provisions let LPs adopt terms from other investors, so GPs must be cautious granting favorable side letters early on.
Manage Side Letters Efficiently
- Side letters negotiation can be costly and complex, but usually involve large investors.
- GPs should standardize common side letter provisions to simplify administration and negotiations.
