In our third webinar, Will Poole, one of Capria’s Managing Partners and Co-Founders, broke down the structures of committees that govern impact funds, covering aspects ranging from composition to key responsibilities and timelines.
- Investment Committee (generally Partners of the GP), with no external input or perspectives.
- Limited Partner Advisory Committee (LPAC), who deal with issues such as conflicts of interest, compensation of GPs, fund life extensions, and key-person actions. It is a mostly homogenous group that holds the IC accountable.
At Capria, we believe that excellence in fund governance involves bringing in expertise beyond the GP to provide support, advice and ultimately help the GPs be more successful.
We believe that the current best practice is to have three committees that govern and advise impact funds:
- Investment Committee (IC): The IC should have broad expertise over all of the fund’s activities, and is generally only GP members. It can have additional members beyond the GPs to fill specific gaps, but most LPs prefer that it includes only the senior leadership of the GP. There should be no LPs on your IC to avoid conflict of interest and to limit their liabilities.
- Limited Partner Advisory Committee (LPAC): The LPAC includes Limited Partners (LPs) and can have members appointed by LPs, but the GP also needs to approve them. The ideal time to form this committee is at first close.
- GP Advisory Board (GPAB): The GPAB is intended to provide valuable investment and strategy advice to the GP. Typically this board comes together gradually as you find the right members. Members should bring investing/operating experience and/or deep geographic or sector knowledge. While they can provide advice, they have absolutely no IC decision making authority. Some LPs can be in this committee, but, again, their role is only to advise the GP, without undue influence.
- Committees should bring local knowledge as well as regional/global expertise to create a qualified, diverse pool.
- Build a profile of your target committee membership before recruiting to ensure each seat represents specific skills or experience.
- Keep in mind that people on your committees represent your fund and act as a signal to future LPs and portfolio CEOs.
- Align liability with the right people.
- Make sure that meeting frequency is maintained.
- Most LPs prefer the LPAC to consist only of other LPs.
- In terms of compensation, LPAC members receive no compensation, while GPAB advisors may get nominal “sitting fees”, but better to provide some small amount of carry vested over their time of service. Committee members should be reimbursed for reasonable out-of-pocket travel.
- LPAC members should have staggered 2-3 year appointments to prevent everyone in the committee rolling off of it at the same time. (This excludes LPAC memberships committed to specific large LPs.)
- Venture Partners generally have a very specific area of involvement. They are not fundraisers or GP decision makers, but can be a valuable addition to the GPAB.
Continue to check our website for updates on future Capria Catalyst webinars!
Email us for more information about this series.