# Side Letter

A **side letter** is a bilateral contract between the GP and an individual LP that modifies, supplements, or supersedes specific terms of the LPA for that LP alone. It is negotiated at the time the LP subscribes to the fund, executed alongside (not as a replacement for) the [subscription document](/fund-mechanics/subscription-document.md), and remains in effect for the life of the fund.

Side letters are common for LPs who have leverage to negotiate — large institutional investors, anchor LPs, or LPs with specific regulatory requirements.

## Common Provisions

| Provision                                      | Description                                                                                            |
| ---------------------------------------------- | ------------------------------------------------------------------------------------------------------ |
| **Fee discount**                               | Reduced management fee rate or carry percentage for the LP (e.g., 1.5% instead of 2.0%)                |
| **Co-investment rights**                       | Right to invest alongside the fund in specific deals, often on carried-interest-free terms             |
| **Enhanced reporting**                         | Additional data beyond standard LP reports (portfolio company financials, ESG, climate metrics)        |
| **Excuse rights**                              | Right to be excluded from specific investments that conflict with the LP's mandate or restrictions     |
| [**MFN clause**](/side-letters-and-mfn/mfn.md) | Right to elect into more favorable terms granted to any other LP                                       |
| **Transfer rights**                            | Right to transfer LP interest to an affiliate without GP consent                                       |
| **ERISA / regulatory provisions**              | Provisions to satisfy the LP's specific regulatory environment (VCOC rights, FOIA exemption, etc.)     |
| **Key person provisions**                      | LP-specific rights if named GP principals leave (e.g., suspension of capital calls, early exit option) |

## Relationship to the LPA

The side letter modifies the LPA for one LP only — other LPs are unaffected. If any provision conflicts with the main LPA, the side letter typically prevails for that LP. Side letters do not require other LPs' consent but must be disclosed (in summary form) if requested under MFN rights.

## Side Letters and MFN Propagation

When a new LP's side letter contains favorable terms that trigger [MFN rights](/side-letters-and-mfn/mfn.md) held by existing LPs, the GP must notify those LPs and allow them to elect into the new terms. This is the [MFN cascade](/side-letters-and-mfn/mfn-cascade.md). The GP manages this process at each subsequent close.

## How Gildi Stores Side Letters

Gildi attaches side-letter terms to each LP's commitment record:

* **Fee override** — stores the LP-specific rate and basis, applied automatically at each fee call.
* **Excuse rights** — flags the LP as excusable from specified investment categories; enforced at capital call creation.
* **Co-investment rights** — noted on the commitment record for the GP's deal team to action manually.
* **MFN tier** — stores the LP's MFN commitment tier, used during cascade analysis.
* **Document reference** — links to the executed side letter document.

Automated enforcement covers fee waivers and excuse rights. Co-investment, reporting, and other operational provisions are surfaced as alerts for manual GP follow-through.


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