Motivate, balance, protect: Is it enough for private market alignment? 

In our latest paper, we argue that LPs should seek to achieve certain high-level objectives in fostering positive alignment with GP partners, employing some of the specific terms noted below:

• Motivation assesses the driving behaviors at the GP and whether they seek to promote performance with strong performance for LPs.
• Balance examines the terms and conditions of the investment and whether any conditions may disproportionately benefit either party, which could potentially damage the relationship or create a mismatch in the dynamic.
• Protection evaluates how the LP may seek to protect its investment in the event of unforeseen complications.

Each of these elements plays an important role in supporting the success of the relationship.

We argue that while legal terms - such as management fees, GP commitments, key person provisions, and clawbacks - are critical, they are not always enough. Beyond documentation, true alignment requires transparency, good-faith behavior, and, above all, trust.

We also believe that motivation starts with financial alignment: this means that GPs should, in our view, have meaningful “skin in the game” through their own capital balanced against long-term incentives such as carried interest. Balance involves a fair division of fees and expenses, structured to support the GP’s operations without eroding LP returns. Protection mechanisms, such as key person clauses and GP removal rights, give LPs tools to act when things go off course—but they are ideally safeguards, not strategies.

Importantly, LPs should consider looking beyond high-frequency risks like fees and evaluating what we believe to be lower-probability but high-impact risks, such as team turnover or misalignment in strategy execution. In a long-term asset class like private equity, these considerations may be pivotal.

Ultimately, seeking alignment through motivation, balance and protections may be a helpful guide, but alignment should not in our view be thought of as a checklist. It’s a relationship. And in a complex, opaque investment landscape, LPs have potential to benefit from experienced partners who may navigate nuance and structure relationships for long-term success.