hard · Private Equity & LBOs
A GP is fundraising for Fund IV and offers 'Most Favored Nation' (MFN) rights in a side letter to a large pension fund.
If a smaller endowment later negotiates a lower management fee, what is the most likely outcome for the pension fund?
- The MFN right is voided if the GP-LP Advisory Committee (LPAC) does not approve the endowment's term.
- The pension fund's fee is automatically increased to match the average of all LPs.
- The pension fund is entitled to the same lower management fee, subject to its commitment being above a certain threshold.
- The GP must refund all fees previously paid by the pension fund to match the new rate.
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