We were empathetic to this situation—many of our team members and peers are also working mothers—and articulated our perspective: While understanding where the firm was coming from, we shared that we believed this investment fund would act as a significant wealth-creation vehicle for both the GP and its affiliates, so anyone likely to gain in this future wealth with the help of limited partners (the “clients” who account for the vast majority of fund capital) should be willing to sacrifice—within reason, although commensurately—alongside these partners to demonstrate sufficient skin- in-the-game and proper alignment.

Internally, the GP had thought potential limited partners were generally only concerned with questions of GP and related commitments in terms of their use as internal talent-retention tools, (i.e., a team member is theoretically less likely to leave for another firm or opportunity if they have a lot of personal capital tied up in a fund). The GP appreciated our feedback; it illuminated a new perspective around these personal commitments as a form of internal/ external investor alignment. It helped that this communication was based on a mutually trusting, established relationship; as investors in the firm’s prior fund, we had proven ourselves as thoughtful and knowledgeable clients, demonstrating value to the firm by providing them with advice early in its lifecycle and serving as a reference for other investors conducting diligence. On our end, our potential aggregate client commitment was not going to account for a large percentage of the fund’s targeted fundraise, and the GP said that we were the only client that had pushed on this topic, leaving us with little tangible leverage in negotiating terms. However, he felt that we had demonstrated ourselves as a valued partner and he was open to negotiation, asking us to present what we thought would be a more equitable alternative.

Understanding the personal circumstances and balance sheets of the two individuals, we put together a scenario in which the they would makepersonal commitments that reflected what we thought was a reasonable percentage of their annual salaries while accounting for their practical needs without undue strain; this number represented a more than 6x increase from the original amount. The GP agreed that this was fair, and upon discussing it with the two promoted parties, they both also agreed that this was an equitable solution based on what they stood to potentially gain in the long term, without negatively affecting their ability to successfully navigate both motherhood and a career in the interim. Our clients ultimately committed to the manager’s fund with this greater alignment in place.

When evaluating investment managers, it is important to us to ensure that the right structure and alignments exist to serve as the foundation for a long-term partnership. While our due diligence will consider many aspects, one of the clearest signals of alignment is when an investment manager invests a considerable amount of their personal wealth alongside its clients in a strategy. We are entrusting the investor with the day-to-day oversight of client capital, so when their own personal capital is commingled alongside, it provides us with a higher degree of confidence that the manager will act in the best interests of that overall pool of capital. If our due-diligence process reveals that such an arrangement can be improved upon, we will engage with the manager to understand the reasons behind the current setup, and work to persuade them to improve the tangible signs of alignment.