Without a purpose-built solution, Most Favored Nations elections are manual, inefficient, and expensive. By relying on outside counsel to run the process, MFN timelines often stretch to 9–12 months, racking up a significant invoice while GPs lose visibility into their commitments.
Meanwhile, GPs are feeling the pressure. LP leverage in a compressed fundraising environment has led to longer side letters with more bespoke terms. There are more provisions to track, elections to manage, and room for mistakes.
Insight for Funds’ digital MFN (dMFN) workflow addresses these issues by providing an end-to-end solution: generate forms from abstracted side letters, distribute them through a secure portal, review and approve elections, and automatically update the fund’s digital compendium — all in one platform.
Dig into the benefits of dMFN from Ontra.
5 reasons to digitize MFN elections
1. Generate MFN forms fast
Form creation has always been one of the most challenging and time-consuming aspects of the MFN process. Counsel must decipher electable provisions across dozens of side letters, decide on a form strategy (universal vs. investor-specific), and manually assemble the documents.
With Insight for Funds, GPs immediately convert side letters to digital documents with categorized obligations. Once digitized, GPs can search and filter through commitment thresholds and investor characteristics to determine electable provisions and generate MFN forms.
GPs and their counsel can run size-based elections, automatically filtering and creating multiple forms based on capital commitment. When enabled, this powerful filter streamlines form generation and organization, saving time by eliminating many manual tasks performed by counsel. Forms can be distributed through Insight for Funds’ secure portal or exported as PDFs.
Hedge fund unlocks speed with dMFN
A multi-billion-dollar, global hedge fund saw significant results with dMFN. The legal team had grown concerned about its outside counsel’s time-consuming, expensive MFN process, which routinely caused confusion among LPs about how provisions differed and which were electable.
When it came to running MFN elections for a new closed-end fund, the in-house legal team chose Insight for Funds. The hedge fund converted side letters and created election forms within two weeks of signing up for Insight. The firm saved 5+ weeks on MFN election form creation.
2. Give LPs a clearer, easier election experience
Investors routinely make erroneous elections due to confusing form layouts. Whether a GP uses a universal form with complex instructions or investor-specific forms, the paper or PDF-based process makes it difficult for LPs to identify their electable provisions and compare options.
MFN forms delivered via Insight for Funds include a navigable table of contents and SmartLine redlining, which lets investors compare electable provisions side by side. Choices are clearly marked, and the review capabilities make the MFN process more accessible to investors. GPs and their counsel deal with fewer errors and minimize the back-and-forth that adds weeks to the timeline.
Credit investment firm enables LP decision-making
Park Square Capital is a leading independent credit investment firm with over $17 billion in AUM. With over 20 active funds, increasing investor demands grew more complex to manage. The firm’s manual MFN process was no longer adequate for its needs, leading the firm and its outside counsel to adopt Insight for Funds.
By adopting Insight and the dMFN workflow, Park Square saw meaningful improvements. During a recent fundraise, 75% of Park Square’s LPs completed their elections digitally via Insight for Funds, improving accuracy and turnaround time.
3. Automatically update the fund compendium
For firms relying on massive spreadsheets or Word documents, updating a compendium can take outside counsel weeks to months. Every investor’s provisions and the GP’s new obligations must be updated correctly, and accuracy is essential for ongoing compliance.
With Insight for Funds, once the GP or its counsel accepts an investor’s elections, the platform automatically reflects them as MFN obligations in the digital compendium. The digital compendium stays current without manual intervention, and counsel avoids any need to make manual changes to side letters, spreadsheets, and other documents.
4. Slash outside counsel costs
Cost is a critical pain point for GPs that navigate large, complex MFN elections. Outside counsel typically bills for several associates’ time over weeks and months, and it’s not uncommon for MFN election fees to exceed expense caps.
Insight for Funds is accessible to both GPs and external counsel. When counsel runs dMFN elections through Insight, it can dramatically reduce timelines, eliminate repetitive manual tasks, and maintain GP visibility. Since form generation, election review, and compendium updates all take less time on the platform, outside counsel can focus on substantive issues during the MFM process. Park Square Capital saw a 50% reduction in MFN completion cost after adopting Insight for Funds.
5. Strengthen audit readiness and compliance
Manual MFN processes create fragmented records spread across emails, spreadsheets, and physical files. When a regulator asks for documentation, assembling the evidence takes time — and the risk of gaps or inconsistencies is high.
A digital MFN process creates a complete audit trail: every election, every approval, every compendium update is documented in the platform. This positions firms for SEC exams and regulatory reviews by providing the documentation and data structure that regulators expect.
Ready to digitize your MFN elections?
MFN elections don’t have to take months and exceed expense caps. With Insight for Funds, GPs and their counsel can run faster, more accurate MFN elections in a single platform — from form creation to compendium updates.
