How a Securities Attorney Would Read a PPM

What the fine print reveals about structure, economics, and governance.

Have you ever opened a PPM, scanned it with eyes glazed over, and signed on the dotted line 15 minutes later? Be honest.

Today’s guest post will help. It’s a guide to reading a PPM for LPs written by a securities attorney: what to pay attention to, what to question, and what might be hiding in plain sight.

-Leyla

About the Author:

Shahrukh Khan is a private funds attorney at Lidow PC, a boutique law firm that advises emerging managers and LPs on a flat-fee basis. He writes Cash and Carried, a Substack newsletter that breaks down the legal and economic architecture of private funds. You can reach him at shahrukh@lidow.co.

Introduction

The private placement memorandum (PPM) is not a thrilling read. It’s a disclosure document at heart, and it tends to behave like one. Dense, repetitive, and most useful (probably) in hindsight.

Most PPMs follow the same general format. There’s a summary of terms up front (along with team bios and information about the investment strategy, often transplanted from the fund’s pitch deck), followed by a long list of risk factors that cover everything from standard illiquidity warnings to the kinds of theoretical disasters that constitute “Acts of God” in the world of Torts.

In some cases, the summary gets pulled out entirely and the risk factors are just stapled to the back of the subscription documents—the investor’s formal paperwork for committing capital.

For investors working with limited time or limited support, the summary often becomes the main point of reference before a deeper dive into the limited partnership agreement (LPA). It’s the more digestible of the two, if only because it attempts to translate the underlying agreement into something closer to plain language. Whether it succeeds is a separate question (it usually doesn’t).

The PPM isn’t designed to sell (even though it is often called a “marketing” document), and I think that makes it a useful place to look for what’s not being said directly in the pitch.

Start and stay with the fundamentals: (1) structure, (2) economics, and (3) governance.

Most of what matters is in the details: how terms are calculated, who approves exceptions, what happens if someone leaves. A clean PPM won’t guarantee a good fund, but it usually signals a competent one. Anything confusing, inconsistent, or unusually generous should prompt a second look or a follow-up question.

With that, here are some key terms LPs typically look at during their operational due diligence process—and the same terms which are most hotly contested. Some of them make it into side letters (especially fee discounts, greater carry allocations, and notice rights), if the LP is granted one.

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🧱 Fund Structure

Domicile:

Most private funds are established in a short list of jurisdictions: Delaware for U.S. domestic vehicles; Cayman, Luxembourg, Jersey, Ireland, Singapore, or Mauritius for cross-border or tax-sensitive structures. These choices tend to reflect precedent more than innovation. The PPM will usually cite the relevant regulations (such as the fact that securities sold by the manager are only to accredited investors or qualified purchasers), and this information rarely departs from standard practice.

Term:

Private fund terms generally run ten years, with one or two one-year extensions (venture funds can be five to seven years). Anything longer than twelve years—outside of open-ended or evergreen strategies—merits attention. So does the process for granting extensions, which often requires LP or LPAC consent, though the terms vary. Duration should match the investment strategy. Longer isn’t necessarily worse, but it isn’t always benign either.