16 Expenses Fully Offset or Covered Under the Management Fee As a general rule, any third-party expenses incurred in the provision of services that typically would be provided by the GP to similar funds should be offset against the management fee. In most circumstances, the following expenses, if charged to the partnership, should be fully offset: Consultants’ Fees—Only costs related to specialized consulting services should be borne by the fund. Due diligence consulting costs are expected to be charged to the portfolio company or covered by the management fee. Any work performed by consultants affiliated with the GP should be disclosed to LPs and subject to any agreed cap on fees. In most cases, the cost of specialized consultants hired at the request of one or more LPs should be paid by the requesting LPs, e.g., for a jurisdiction- or institution-specific matter. ESG-related Expenses—Consultant costs related to ESG due diligence, management and reporting should be regarded in the same way as general due diligence consulting costs. If specialized consultants are required to fulfill specific LP requirements, resulting fees should be paid by the requesting LPs. Placement Agent Fees—The economic arrange- ment of the GP and its placement agents should be fully disclosed as part of the due diligence materials provided to prospective LPs. Placement agent fees should be borne by the fund manager while placement expenses should be borne by the fund. Where placement agent fees are allocated to the fund, the management fee should be fully offset for such amounts. The LPAC should review placement agent expenses to ensure they are reasonable and not excessive. Operating Partners/Consultants—Increasingly, GPs are engaging Operating Partners with specialized expertise to execute on specific strategic growth plans, paid for by the portfolio company. Where such partners are presented to LPs as members of the GP’s team, LPs should understand how they are compensated, i.e., directly by the GP or by the portfolio company. Any fees paid by the portfolio company for services performed by Operating Partners deemed to be affiliates of the GP should be fully offset against the management fee. Unforeseen Expenses—During the life of a fund, expenses will arise that may not have been considered at the initiation of the fund and are therefore are not covered in the fund documents. GPs should create with their LPs decision frame- works that will allow for making consistent, rational, and defensible expense allocations over time. GPs should engage LPs in their decision-making process regarding the allocation of such expenses and ensure that the LPAC is apprised and support- ive of expense allocation policies and evolving interpretations of existing policies. The LPAC should review the application of fee offsets and partnership expenses annually. GP AND FUND ECONOMICS