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How does the LPA's Fair Value discretion (Section 4.7) interact with a fund's separate Valuation Policy?

Section 4.7 of the Cornerstone LPA says the calculation of Fair Value of any Investment or Fund Asset is determined by General Partner at least annually, and that "all valuations made pursuant to this section shall be final, conclusive and binding on the Fund, all Limited Partners, their successors and assigns." That reads as very broad, unilateral discretion for the GP. Given that funds are also expected to adopt a separate Valuation Policy, is that Policy meant to constrain or structure how the GP exercises this LPA-granted discretion (i.e. a real limit on the "sole discretion"), or is it more just internal documentation/process for arriving at a number the LPA already lets the GP set unilaterally? Practically, could an LP ever successfully challenge a GP's valuation under this LPA language if the GP followed its own Valuation Policy?
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- Practically, the LPA gives the GP the legal authority; the Valuation Policy is the process the GP uses to exercise that authority.
- So yes, the Policy should structure and evidence the GP’s decision-making, but under this Cornerstone language it is usually not a hard external constraint unless the LPA expressly incorporates that Policy or makes compliance mandatory.
- “Final, conclusive and binding” is very GP-favorable. An LP challenge would usually need more than disagreement on price.
- A challenge is more plausible if there is bad faith, fraud, gross negligence, willful misconduct, breach of the LPA, or failure rising to “Malfeasance,” especially given the fiduciary duty language. If the GP followed its policy in good faith, an LP challenge is generally difficult.

Reference:
- https://decilehub.com/base/1-general_questions/28283-what-is-the-cornerstone-start-agreement
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Funds adopt a valuation policy. Investments are marked up or down via this policy by the fund administrator using supporting documentation.

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