The coronavirus pandemic has thrust much of the PE industry into a state of uncertainty, requiring sponsors to pursue novel approaches to keeping their funds and portfolio companies afloat. A popular solution to secure liquidity for capital injections into troubled portfolio companies has been for GPs to issue fund-level preferred equity. Although it is a very sound source of liquidity, it is also less proven in the industry and comes with its own forms of risks and issues. To help sponsors navigate those risks effectively, the Private Equity Law Report interviewed Weil partners Stephanie Epstein Srulowitz and Brian Parness. This second article in a two-part series details the need for LP approval and potential sources of conflicts for sponsors to avoid, along with a forecast of the future of preferred equity as an asset class. The first article provided an overview of the key features of preferred equity and the various economic structures available to fund sponsors. For more on preferred equity in other contexts, see “Evolution and Future of GP‑Led Restructurings: Transaction Structuring Trends and Conflicts of Interest Management (Part One of Two)” (Jun. 2, 2020); and “Legal Issues With Minority Stake Transactions: Important Structural Considerations and Managing Limited Liquidity Options (Part Two of Two)” (Jul. 30, 2019).