Here are three "unforced errors" which could be easily avoided. At every industry conference I have attended there has been an investor panel session where deeply felt frustrations have been vented.

There is, of course, an inevitable commercial tension between an investor and fund manager in settling the terms for fund participation. Where the balance is struck will, like all commercial negotiations, depend on the bargaining power of the parties. In the main, though, the issues which have caused the greatest tooth grinding have fallen outside this spectrum. What raises most ire are irritants perceived to be unnecessary or avoidable. Here are three.

They may seem obvious, but they come around all too often.... The flexibility that can't be explained Investors understand that in setting structures and investment and borrowing permissions managers will need some flexibility. However, where managers are seeking substantial carve-outs or discretions in general terms, they should be able to explain at a commercial level (even if they don't want to be pinned down legally) the sort of situation when they think it may be useful to rely on these. "I thought it would be good to preserve flexibility" or even worse "my Counsel thought it would be good to be flexible" tends not to play well. Have examples ready. An illustration goes a long way.

Unnecessary absolutism

Fund documents have to operate over long periods and often in circumstances not envisaged at the time of formation. Managers do need discretion to respond to changing circumstances. However they do not always need "absolute discretion". There has been an observable trend in recent years for absolute discretions to creep in where they used not to be. Where absolute discretion is sought this is often to avoid scope for future challenge on the grounds of unreasonableness. A Manager may not want to set out its reasons to refuse a......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.