Private fund managers often struggle to surface and confirm information in their private equity side letters, whether for ongoing fund compliance or answering investors’ questions.
❌ Ctrl-F surfaces too much or irrelevant information.
❌ Underlying contract language lives in separate PDFs.
❌ Information quickly becomes outdated.
How can private fund managers solve these problems? By adopting a purpose-built AI solution to power their fund lifecycle. Insight from provides industry-leading AI abstraction and search capabilities to help firms understand their agreements, track upcoming deliverables, and meet commitments, all with one easy-to-use solution.
What is a side letter?
Side letters are unique, additional arrangements between certain parties to a transaction that supplement the terms of the principal agreement. Private equity side letters create bespoke terms between a GP and LP separate from a fund’s Limited Partnership Agreement.
Side letters in private equity and other private market transactions are binding contracts — they create additional obligations for GPs and add complexity to GPs’ compliance programs.
Traditional private equity side letter management
Private fund managers’ previous (and often current) processes and legacy tech haven’t kept up with the complexity of complying with today’s side letter obligations.
An Ontra survey found 77% of respondents worried at least once in the past year about failing to comply with investor obligations.
Traditional side letter management leads to:
- Delayed compendia: Managers have traditionally relied on massive compendia that take months to build and become out of date quickly to manage their investor obligations.
- Compliance risk: During the months without a compendium, firms might not be aware of all their obligations and face a significant risk of noncompliance. Once they receive a compendium, the firm still lacks an efficient way to identify, assign, and complete its commitments.
- Inadequate search: With Ctrl-F, it’s difficult for fund managers to identify particular provisions and obligations across a fund, let alone multiple funds. Once they find the information they need, they have to separately, manually review the underlying contracts.
- Ad hoc processes: To comply with their obligations, stakeholders often string together spreadsheets, calendar reminders, emails, tabbed binders, and even Post-it notes.
Onboard Insight quickly with AI
Implementing Insight is simple and cost-effective for our customers.
Our AI-powered contract digitization quickly processes side letters and identifies and categorizes key provisions, which are reviewed by Ontra-trained specialists. It transforms contracts into structured data, including but not limited to obligation names, descriptions, and categories.
With Insight, private fund managers and their counsel gain a digital compendium they can quickly search and use to support compliance, routine legal workflows, and their investor relations teams.
Let’s take a closer look at how customers leverage AI to digitize and onboard side letters to Insight.
Digitizing your private equity side letters
AI-enabled onboarding lets Ontra upload fund managers’ side letters exceptionally quickly.
First, Ontra begins with a sample selection of a fund manager’s side letters. Once uploaded into Insight, the AI automatically begins generating the document type, parties, and effective date in seconds. Ontra’s Product Operations team carefully reviews AI outputs during this initial onboarding stage.
Next, AI-enabled onboarding transforms all side letters into structured contract data by:
✅ Identifying and abstracting individual clauses,
✅ Generating obligation names, categories, and descriptions, and
✅ Grouping similar obligations from new and existing fund documents.
How Ontra’s AI-enabled contract digitization works
Ontra’s AI identifies particular side letter clauses and highlights the corresponding language in the agreement. It then generates obligation names, descriptions, and categories, which fund managers can revise whenever necessary.
AI-enabled onboarding ensures fund managers and their counsel don’t need to spend days or weeks manually designating their obligations in the solution.
Once Insight has a foundation of side letters and categorized obligations, it automatically reviews any existing obligations in the solution and uses a proprietary search algorithm to review new and existing provisions across funds to group similar provisions together. Since GPs often agree to the same or similar provisions across side letters, these groupings can streamline many legal processes.
While GPs can rely on AI to do the heavy lifting during the contract digitization process, Ontra’s Product Operations team reviews AI-abstracted information to ensure our customers build a high-quality data set in Insight.
How to implement custom categories in Insight
Our AI-powered digitization automatically categorizes obligations in Insight using numerous common categories. However, private fund managers and their counsel can also designate custom categories for particular LPA and side letter clauses during and after onboarding.
Once private fund managers create a custom category, their internal or external counsel, or an Ontra Legal Network member, can properly tag these provisions in Insight. After that’s complete, managers and their counsel can easily filter their obligations based on the custom category and, when needed, pull those terms into a PDF disclosure scheduled to distribute to investors.
Ontra understands that categorization is somewhat fluid, and categories and naming conventions are often bespoke to each firm. Private fund managers and their counsel can remove or add tags to obligations in Insight at any time.
Ready to better manage private equity side letters?
- AI-powered contract digitization turns side letters into structured data quickly and effectively, creating a single source of truth.
- AI categorizes key clauses and obligations in side letters.
- Humans in the loop review the AI-generated information to ensure high-quality contract data.
- Firms create custom categories related to SEC regulations, ESG, and other firm-specific needs.
Ontra’s Insight is the AI platform powering the private fund lifecycle. By embracing technology, private fund managers can simplify fund management, proactively manage risk, increase transparency, and reduce expenses.
Leading private fund managers are already turning to Insight to digitize their side letters, improve transparency into their commitments, and track compliance. Get started with an Insight demo today.
