Washington, DC – May 14, 2026 — As private equity fund formation costs continue to escalate with little accountability and minimal transparency for investors, the Institutional Limited Partners Association (ILPA) today released new guidance aimed at addressing structural misalignments between Limited Partners (LPs) and their fund managers (General Partners, GPs).
The guidance responds to growing concerns among LPs about escalating legal and administrative costs incurred during fund formation. LPs typically bear these costs despite limited visibility into or control over the decisions driving them.
Organizational expenses borne by LPs commonly include the legal, administrative, and compliance costs incurred during the fund formation process, often directed by GP‑selected counsel without LP involvement in counsel selection or budgeting. The latest guidance expands upon ILPA’s previous guidance on the treatment of organizational expenses in ILPA Principles 3.0.
“The private equity industry has been built on strong partnerships, and often those partnerships start with the fund formation process,” said Scott Ramsower, ILPA Board of Directors Chair and Head of Private Equity Funds at the Teacher Retirement System of Texas. “The legal, administrative, and compliance costs incurred by investors to launch a fund continue to rise without improving alignment or trust. The guidance ILPA released is a constructive starting point. Meaningful progress will depend on engagement and collaboration across the industry.”
ILPA’s framework sets out practical, market‑informed recommendations to improve alignment between GPs and LPs, including clearer expense caps, equitable cost‑sharing when budgets are exceeded, and greater transparency around legal fees and budgeting. The guidance is intended to promote fairness, aid in the management of costs, and preserve the long‑term, partnership‑based nature of private equity investing.
“For investors managing capital on behalf of pension funds, cost discipline is a core part of fiduciary responsibility,” said Greg Jania, Global Co‑Head of Private Equity at APG Asset Management. “We support ILPA’s initiative to cap the share of organizational expenses borne by LPs. Reasonable, proportionate, and transparent caps enhance alignment between managers and investors and help ensure that long‑term value flows to the end clients whose capital makes private markets possible.”
“The State Board of Administration of Florida supports this initiative because it directly addresses a longstanding misalignment in private equity fund formation costs,” said John Bradley, Head of Private Markets and Senior Investment Officer of PE at the State Board of Administration of Florida. “The current fund formation expense structure often results in LPs paying for a private equity fund’s lawyers to negotiate against those very LPs. Greater transparency and equitable cost sharing should result in greater efficiency, fairness, and trust between investors and fund sponsors. As fiduciaries, we believe organizational expenses should be managed with the same discipline expected throughout the investment lifecycle. This framework advances reasonable standards that better align incentives and protect investor capital without impeding innovation or market access.
Developed with input from both LP and GP market participants, the guidance is designed to be flexible across fund sizes and strategies while encouraging more efficient, transparent fund formation practices.
Get the Full Guidance: The Alignment Gap: Rethinking Costs in Private Equity Fund Formation
