What Is a Side Letter in Private Funds?

A side letter is a separate agreement between a general partner and an individual limited partner that modifies or supplements the standard fund terms for that specific investor. Side letters commonly cover fee arrangements, co-investment rights, reporting requirements, most-favored-nation provisions, transfer rights, or specific regulatory and tax accommodations. They sit alongside the main fund documents rather than replacing them, which means a single LP's actual terms can only be understood by reading the fund agreement and the side letter together.

Why it matters: Side letters create bespoke obligations that differ from GP to GP and from investor to investor, and those terms are easy to lose track of once they are signed and filed away. For an LP, knowing which special reporting rights, fee terms, or notification requirements apply to each relationship is a document-management discipline, and missing a side letter provision can mean forgoing a right the LP negotiated and paid for.