A question that has arisen in the current climate of hedge fund investor caution in the approach to the terms of investment, and managers being more ready to negotiate the offering terms, is: What is the legal effect of side letters entered into between an investor and the fund (usually through the investment manager) following negotiations as to the terms of a specific investment, which provide for terms more favorable than those offered generally by the fund’s offering documentation?  In a guest article, Christopher Russell and Rachael Reynolds, Partner and Managing Associate, respectively, at Ogier in the Cayman Islands, provide a detailed answer to this question, including a discussion of four principles that should be borne in mind when preparing a side letter to ensure that the letter has legal and binding effect.