Beroni Group: Managing GP-LP Relationships Case #: INS078

Reference material: Note on Private Equity Partnership Agreements 9-294-084 and A Note on Limited Partner Advisory Boards, HBS publication 9-808-169 1a) How should Jack Draper deal with allocation of deal flow between the different funds that had overlapping mandates, and/or between one of his current funds and an eventual successor fund? Explain your answer. (There are many optional ways to invest, e.g, BAF II first; BAF III first; proportionately between BAF II and BAF III; discretionary investment-by-investment decision) 1b) Should allocations be fixed or discretionary? Explain why. 1c) Regarding the impending deal, which AC should he approach first? Explain why. 1d) In addition to approaching one of the ACs first, with what sort of proposal should he presentto that AC in order to minimize potential tension among the differently-invested LPs?

2a) How should Jack Draper deal with downward pressure on his management fees as more assets came under management? 2b) Since some costs were fairly steady regardless of how much capital is under management (such as rental costs, back office staff, etc.), how could he reject investor demands to lowermanagement fees? 3) Since the senior Beroni Group principals served on the deal teams and Advisory Committees of more than one fund, how could he help his investors feel comfortable that the principals (and staff) would allocate their time appropriately between the respective funds? 4) How could Jack Draper help his investors get comfortable with the prospect of de facto crossliability ? that is, if one of his funds were to run into difficulty, how could he ?ring fence? other unrelated funds to ensure there were no negative financial or time effects on the GP and the managers? The concerns are: Cross-liability if one of his funds were to run into difficulty, that could result in a negative financial effect on the other funds Staff?s attention to their investments is being compromised because of the other funds.

5a) How could Jack balance the needs and requests of EuroBank, one of his oldest and largest investors, with the quite legitimate expectation of other LPs in BAF II and BAF III that EuroBank not be shown favoritism, and that a portion of EuroBanks?s interest be forfeited and distributed to them? 5b) Would he be faced with a flood of defaults and withdrawal requests if he were to treat EuroBank gently? 5c) What fiduciary duty did he owe to the non-defaulting LPs in BAFII and BAFIII that had apparently managed their finances more prudently than EuroBank? 5d) Would the GPs risk breaching the limited partner agreements to implement EuroBanks?s proposal? (Page 2 of the case states, GPs of BAF II have some discretion over enforcement of the forfeiture provision)

Beroni Group: Managing GP-LP Relationships Case #: INS078 Deliverable: written responses - one pdf from each team - 4 to 6 pages in total length. Due Date: 5:30 pm February 21, 2017 (e-mail submittal) Ensure you submit responses to parts a, b, c, & d of questions 1 and 5 and a & b of question 2. Reference material: Note on Private Equity Partnership Agreements 9-294-084 and A Note on Limited Partner Advisory Boards, HBS publication 9-808-169 1a) How should Jack Draper deal with allocation of deal flow between the different funds that had overlapping mandates, and/or between one of his current funds and an eventual successor fund? Explain your answer. (There are many optional ways to invest, e.g, BAF II first; BAF III first; proportionately between BAF II and BAF III; discretionary investment-by-investment decision) 1b) Should allocations be fixed or discretionary? Explain why. 1c) Regarding the impending deal, which AC should he approach first? Explain why. 1d) In addition to approaching one of the ACs first, with what sort of proposal should he present to that AC in order to minimize potential tension among the differently-invested LPs? 2a) How should Jack Draper deal with downward pressure on his management fees as more assets came under management? 2b) Since some costs were fairly steady regardless of how much capital is under management (such as rental costs, back office staff, etc.), how could he reject investor demands to lower management fees? 3) Since the senior Beroni Group principals served on the deal teams and Advisory Committees of more than one fund, how could he help his investors feel comfortable that the principals (and staff) would allocate their time appropriately between the respective funds? 4) How could Jack Draper help his investors get comfortable with the prospect of de facto crossliability - that is, if one of his funds were to run into difficulty, how could he \"ring fence\" other unrelated funds to ensure there were no negative financial or time effects on the GP and the managers? The concerns are: Cross-liability if one of his funds were to run into difficulty, that could result in a negative financial effect on the other funds Staff's attention to their investments is being compromised because of the other funds. 5a) How could Jack balance the needs and requests of EuroBank, one of his oldest and largest investors, with the quite legitimate expectation of other LPs in BAF II and BAF III that EuroBank not be shown favoritism, and that a portion of EuroBanks's interest be forfeited and distributed to them? 5b) Would he be faced with a flood of defaults and withdrawal requests if he were to treat EuroBank gently? 5c) What fiduciary duty did he owe to the non-defaulting LPs in BAFII and BAFIII that had apparently managed their finances more prudently than EuroBank? 5d) Would the GPs risk breaching the limited partner agreements to implement EuroBanks's proposal? (Page 2 of the case states, GPs of BAF II have some discretion over enforcement of the forfeiture provision) ____________________________________________________________________________