Hedge fund managers intent on attracting institutional capital often feel compelled to entertain requests for preferential treatment via side letters from institutional investors.  But the “cost of capital,” as it were, may increase materially where a side letter is involved.  Such instruments raise regulatory concerns, present business challenges and create operational issues.  See “RCA Session Covers Transparency, Liquidity and Most Favored Nation Provisions in Hedge Fund Side Letters, and Due Diligence,” Hedge Fund Law Report, Vol. 6, No. 1 (Jan. 3, 2013).  In an effort to identify some of the chief regulatory concerns raised by side letters – and to offer suggestions on how to address those concerns in a way that makes business sense – the Hedge Fund Law Report recently interviewed Christopher Wells, a partner and head of the hedge fund practice at international law firm Proskauer Rose LLP.  Our interview with Wells covered selective disclosure, the role of advisory committees, most favored nation provisions, allocation of costs of administering side letters, ERISA considerations, the role of state “sunshine” laws, considerations specific to sovereign wealth funds and much else.  For additional insight from Wells, see “Managing Risk in a Changing Environment: An Interview with Proskauer Partner Christopher Wells on Hedge Fund Governance, Liquidity Management, Transparency, Tax and Risk Management,” Hedge Fund Law Report, Vol. 5, No. 13 (Mar. 29, 2012).  This interview was conducted in connection with the Regulatory Compliance Association’s upcoming Regulation, Operations & Compliance 2013 Symposium, to be held at the Pierre Hotel in New York City on April 18, 2013.  That Symposium is scheduled to include a panel on side letters entitled “Navigating the Side Letter Negotiation & Due Diligence Process.”