Side Letter Most Favored Nation Calculator

An MFN clause lets LPs inherit the best terms in other side letters — compute savings.

Commitment

Standard mgmt fee %

Best observed fee %

Fund life years

Carry differential %

Expected fund profit

Total MFN savings

$272,500

Fee savings

$250,000

Carry savings

$22,500

How the math works

Fee savings = commit × (std − best) × years. Carry savings = profit × share × delta.

$10M × 0.25% × 10 = $250k fee. $15M × 10% × 1.5% = $22.5k carry. Total $272.5k.

How to Use

Enter your commitment.
Enter standard management fee %.
Enter best observed fee break %.
Enter fund life years.
Enter carried interest differential %.
Enter expected fund profit.
Read MFN savings.

Frequently Asked Questions

What is an MFN clause?

Most-favored-nation provision in an LP side letter guarantees the LP will receive any more-favorable economic terms granted to other LPs of the same or smaller commitment size. Types: 'economic MFN' (just fees/terms), 'full MFN' (all terms). Invoked at close of investment period or annually. LP reviews other side letters (via counsel or third-party administrator), then elects provisions to inherit.

What typically gets inherited?

Management fee discounts (10-50 bps). Carried interest discounts (1-3% of carry). Reporting enhancements. Co-investment rights. GP clawback strengthening. Side-pocket restrictions. Investment policy restrictions (ESG, geography, sector exclusions). Redemption rights. In practice: 60-80% of LPs elect fee breaks from other side letters; 20-30% elect governance/reporting improvements.

How does GP manage?

GP must disclose all side letters to MFN-eligible LPs. Many GPs use 'commitment-size laddering' — larger LPs (>$50M) get better terms, explicitly excluding smaller LPs from MFN eligibility. Creates cleaner tier. Some GPs use 'side letter harmonization' — draft terms that work for all, avoiding MFN cascade. Increasingly common post-2020 as LPs get sophisticated about MFN enforcement.

Value to LP?

For $10M commitment, 20 bps fee break × 10-year fund = $200k savings. 1% carry break on $20M distribution profit = $200k savings. Combined: $400-500k on $10M commitment. LP legal cost to review side letters: $10-30k one-time. ROI very positive for sophisticated LPs. Most mid-large LPs invoke MFN on every fund; retail LPs typically lack resources.