Resources / Glossary / LP advisory committee

LP advisory committee.

Aka. LPAC · Advisory board · Limited partner advisory committee
All terms

What is an LP advisory committee?

The LP advisory committee — almost always called the LPAC — is a committee of selected limited partners, usually the fund's largest or most strategic investors, formed under the limited partnership agreement. Its job is to review matters where the general partner has a conflict of interest and to consent to specific actions the LPA reserves to it.

The LPAC is not a board of directors. It does not run the fund, pick investments, or direct the manager. The GP retains full investment discretion. The LPAC exists as a check on the narrow set of decisions where the GP's interests and the LPs' interests may diverge — and as a sounding board the GP can consult for cover on close calls.

Membership is a privilege the GP grants, often tied to commitment size or to terms negotiated in a side letter. Seats carry information and influence, which is why the largest LPs treat an LPAC seat as a meaningful part of a commitment.

What an LPAC actually decides

The LPA enumerates the matters reserved to the LPAC. The exact list is negotiated, but it typically clusters around conflicts and valuation.

  1. Conflicts of interest. Transactions between the fund and the GP, its affiliates, or another fund it manages — cross-fund trades, GP-led secondaries, affiliate service arrangements.
  2. Valuation policy. Reviewing the methodology used to mark unrealized holdings, and sometimes specific marks that drive carried interest.
  3. Key amendments and waivers. Consenting to changes in investment guidelines, extensions of the investment period or fund term, and certain waivers of LPA restrictions.
  4. Related-party fees. Approving or reviewing fees the GP or its affiliates charge portfolio companies.

Critically, LPAC approval of a conflicted transaction generally cleanses the conflict — the GP can proceed without breaching its duties — even though the LPAC did not make the investment decision itself.

LPAC versus a board of directors

The distinction matters because it bounds liability. A board owes fiduciary duties and can be held responsible for the entity's conduct. An LPAC is explicitly advisory and consent-giving: members generally do not owe fiduciary duties to other LPs, and the LPA usually includes exculpation so a member is not liable for a decision made in good faith. The GP, not the LPAC, remains accountable for performance. An LPAC seat gives an LP visibility and a veto over conflicts — it does not make that LP a manager of the fund.

Frequently asked.

5 questions
01 Does the LPAC approve individual investments?

No. Investment discretion stays with the general partner. The LPAC consents only to the specific matters the LPA reserves to it — overwhelmingly conflicts of interest, valuation policy, and certain amendments — not to the merits of individual deals.

02 Who sits on an LP advisory committee?

Typically the fund's largest limited partners, plus a few strategically important investors. Seats are granted by the GP and are often negotiated alongside commitment size or secured through a side letter. The committee is usually small enough to convene quickly when a conflict needs clearing.

03 What is the difference between an LPAC and a board of directors?

A board governs an entity and its members owe fiduciary duties. An LPAC is advisory and consent-giving: it reviews conflicts and approves reserved matters but does not manage the fund. LPAC members generally do not owe fiduciary duties to other LPs and are usually exculpated for good-faith decisions.

04 Does LPAC approval remove a GP's conflict of interest?

In most LPAs, yes — LPAC consent to a conflicted transaction cleanses the conflict, allowing the GP to proceed without breaching its duties. This is the central reason GPs bring conflicts to the LPAC: it converts a discretionary judgment call into a documented, approved action.

05 How does an LPAC review conflicts in practice?

The GP presents the proposed transaction, the conflict, and the proposed terms, and the committee votes. The quality of that review depends on how much underlying detail the GP shares. Keeping the supporting record — valuations, comparable terms, the diligence behind a cross-fund trade — organized and queryable makes the committee's consent faster to give and easier to defend later.

Related terms

Ffund economics

Fund-of-funds

A fund that invests in other funds rather than directly in companies — offering diversified access at the cost of a <em>second</em> layer of fees.

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Jfund economics

J-curve

The shape of a fund's net returns over time — <em>negative early</em> as fees and markdowns bite, then rising as investments mature and distributions arrive.

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Co-investment

A direct investment an LP makes alongside the fund in a single deal — usually with <em>reduced or zero</em> fees and carry, on top of its fund commitment.

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Cfund economics

Carried interest

The GP's share of a fund's profits — conventionally 20% — paid only after investors recover their capital and <em>preferred return</em>.

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Capital call

A formal demand from a fund to its investors to wire a portion of their committed capital, issued when the GP needs cash to fund an <em>investment</em> or expense.

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Sfund economics

Secondaries

The market for buying and selling existing private-fund interests, letting an LP exit a commitment early or a GP <em>restructure</em> a fund before its natural end.

Open
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