- What's the practical difference between a Deal-by-Deal and Whole-of-Fund waterfall for an LP, and which one do institutional LPs actually prefer? Deal-by-Deal pays the GP carry investment by investment as soon as each one returns capital, which is friendlier to the GP and common among emerging managers. Whole-of-Fund holds all carry back until LPs have their entire capital back across the whole fund, which protects LPs from overpaying carry on an early winner before later losers show up, and most institutional LPs actually prefer it for exactly that reason even though Cornerstone's target audience skews toward Deal-by-Deal.
- Why does the LPA let the GP set "Fair Value" unilaterally and call it final and binding when there's a separate Valuation Policy that seems to want a more structured process? The Valuation Policy isn't a legal override of the LPA, it's the internal procedure the GP adopts to make good on the fiduciary duty the LPA already imposes. The LPA gives the GP final say so investors aren't stuck in constant valuation disputes, and the Valuation Policy is how a responsible GP self-polices that discretion with a consistent, GAAP based methodology instead of picking whatever number it wants.
- What actually triggers Limited Operations Mode versus outright GP removal, and which happens more often? Limited Operations Mode is the lower bar, triggered by two thirds of LPs believing a Material Breach occurred, and it just freezes new investments and fees for a 90 day negotiation window. Actual removal needs that same Material Breach to also be adjudicated by a court, a meaningfully higher bar, so Limited Operations Mode is the far more common real world outcome
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