Yuliya Oryol Discusses LPACs

02.26.2021
The Regulatory Fundamentals Group's Weekly Roundup

Yuliya Oryol was quoted in the article, “LPAC Considerations and Membership,” which was featured in The Regulatory Fundamentals Group’s Weekly Roundup newsletter. The article takes an in-depth look at the “use of advisory committees of limited partners (LPACs)...as a mechanism to address conflicts on the part of an investment adviser, and to provide a sounding board for the GP.”

Commenting on how not all private funds use LPACs, Yuliya said, “Many open-ended funds such as hedge funds and real estate funds do not actually have an LPAC comprised of LPs in the fund or, even if the partnership agreement provides for the mechanism to form an LPAC, in practice the LPACs are not formed by the GP. This is likely intentional since a GP may feel more pressure to avoid self-interested practices and related party transactions when an advisory committee is overseeing its conduct. Also, if a fund's performance is poor or if the GP is facing certain challenges in the market with its strategy or assets, there may be a further incentive to avoid a strong LPAC."

She also noted there is a current trend for funds to have "intentionally weak LPACs that are not asked to review and approve conflicts, related party transactions and valuations, which were historically addressed by LPACs, but instead are simply provided with notice of particular issues without the ability to meaningfully challenge the GP."

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