Mandate Inconsistency

Mandate Inconsistency occurs when a manager’s realized behavior diverges from their stated mandate—what they said they would do in the PPM, pitch, and underwriting narrative. This can include stage drift, sector creep, geographic expansion, increased leverage, changes in portfolio construction, or altered follow-on behavior.

Allocators don’t require rigidity. They require consistency and disclosed rules. Inconsistency is dangerous because it breaks the original underwriting: the allocator approved one risk-return profile and ends up holding another.

How allocators define mandate inconsistency risk drivers

Allocators evaluate mandate consistency through:

• Strategy boundaries: what is explicitly in-scope vs out-of-scope
• Deal pattern adherence: actual deal mix vs stated target
• Stage/sector/geography drift: measurable shifts over time
• Portfolio construction shifts: concentration, reserves, sizing changes
• Risk posture changes: leverage, duration, liquidity profile
• Disclosure discipline: whether deviations are explained and approved
• Governance controls: LPAC/consent requirements for material changes

Allocator framing:
“Did we invest in a strategy—or in a manager who can redefine the strategy later?”

Where mandate inconsistency matters most

• opportunistic funds with broad discretion
• first-time funds where boundaries aren’t proven
• multi-strategy platforms with allocation flexibility
• periods of market stress when temptation to “do anything” rises

How inconsistency changes outcomes

Strong mandate discipline:

• makes underwriting repeatable and defensible
• reduces governance friction and re-up risk
• improves trust even when markets are difficult
• supports cleaner benchmarking and attribution

Weak mandate discipline:

• increases surprises and governance conflict
• reduces confidence in reporting and explanations
• triggers side letter restrictions and tighter monitoring
• increases probability of non-re-up and negative references

How allocators evaluate discipline

Conviction increases when managers:

• define boundaries clearly and measure adherence
• disclose deviations early with rationale and evidence
• use governance mechanisms for material changes
• show that edge persists without changing the mandate

What slows allocator decision-making

• inability to quantify how the portfolio matches the mandate
• “we go where opportunities are” language without boundaries
• deviations explained as one-offs that become patterns
• inconsistent messaging between team members

Common misconceptions

• “Flexibility is always positive” → flexibility without rules is optionality risk.
• “Mandate drift is inevitable” → drift is manageable with governance and disclosure.
• “LPAC doesn’t care” → LPAC cares when underwriting breaks.

Key allocator questions during diligence

• What boundaries are hard limits and what are soft limits?
• How does actual deal mix compare to targets historically?
• What deviations occurred and how were they governed?
• What triggers LPAC or LP consent for mandate changes?
• How do you prove edge without expanding scope?