Side letters that don't come back to bite.

A side letter is a promise made to one investor that the fund documents do not make to everyone. The trouble starts when the promise is operational rather than economic, because operational promises have to be kept every quarter for a decade by people who were not in the negotiation.

Bespoke reporting is the most common offender. An anchor investor asks for a particular format on a particular cadence, the fundraising team agrees, and the finance function inherits a permanent obligation that does not scale. Multiply by four anchors and the back office is producing five sets of accounts.

The most-favoured-nation clause is the structural risk. Drafted without a commitment threshold or a carve-out schedule, it broadcasts every concession to every investor, which means the cost of a single side letter is not one investor's fee break but the whole fund's. Tier the MFN, name the carve-outs, and price the concessions before the first close.

The discipline that solves most of this is simply keeping a live side letter register from the first commitment onward — one row per promise, with an owner. Funds that maintain one negotiate the second close from a position of knowledge. Funds that do not, discover their obligations during an audit.