7 ILPA Principles 3.0 Underlying Themes STEWARDSHIP: Private equity firms invest capital entrusted to them by fiduciaries, who in turn have delegated to GPs the solemn responsibility to manage the savings and capital of individuals and organizations that rely on the returns generated by those assets. Accordingly, this edition of the Principles reflects a synthesized view of exemplary and adoptable practices, rather than behaviors dictated by the market conditions of any particular point in time. EVOLUTION OF THE PRIVATE EQUITY INDUSTRY: The volume of both institutions and capital flowing into pri- vate equity has swelled significantly over the last decade, as has the range of means by which investors allocate that capital. The industry has diversified meaningfully beyond blind closed-end pools, to encompass co-invest- ment, direct investment, separately managed accounts and other bespoke and semi-bespoke vehicles, often with different risk-return profiles, adding complexity to legal structures as well as fund governance and disclo- sures. MARKET CONTEXT: Against a backdrop of historic levels of fundraising, record distributions to LPs and rising competition for allocation, alignment between GPs and LPs, and among LPs, is exceedingly challenged at pres- ent, even as the industry more openly embraces ethical behavior and responsible investment. Since the last edition of the Principles, the industry has become regulated for the first time in both the US and Europe, ushering in an era of unprecedented expectations around transparency. SHARED RESPONSIBILITY: Private equity is unique in that it is rooted in a sense of long-term partnership. The recommendations herein are intended to address both LP and GP behaviors that will promote stronger align- ment both among business partners, as well as across different entities investing alongside one another in a common market. The guidance in this third edition reflect considerable input from market leaders in the LP and GP community as well as industry bodies and the service provider community, led by contributions from ILPA’s Principles working group, ILPA’s Industry Affairs and Standards Committee, and the ILPA Board of Directors. We are grateful for the thoughtful contributions received. Several elements within Principles 3.0 are addressed through previously published ILPA standards and guidance available online at ilpa.org. These include: Quarterly Reporting Standards 2011 Capital Call & Distribution Notice Template 2011 Reporting Template for Fees, Expenses and Carried Interest 2016 Model Subscription Agreement 2017 Guidance on Subscription Lines of Credit 2017 Due Diligence Questionnaire 2018 Industry Code of Conduct Guidelines on Harassment, Discrimination and Workplace Violence 2018 Portfolio Company Metrics Template 2019 Guidance on GP-led Secondary Fund Restructurings 2019 Model Limited Partnership Agreement Forthcoming Suggestions for topics worthy of future inclusion in ILPA Principles, or to be addressed through ILPA’s educational and best practices platforms, can be submitted to ILPA via email to [email protected] OVERVIEW