LP-led Fund Secondaries – What You Need To Know

Fund secondaries transactions have grown enormously over the last 20 years or so. Recently, funds have been under pressure to return capital to investors in the context of a range of market constraints on traditional exit routes for PE buyers. We have seen turbulent capital markets restricting traditional IPO exits, changes to leverage models resulting from higher interest rates and more generally a pricing mismatch between the expectations of buyers or sellers, all of which have impacted fund-level liquidity.

Secondaries have to a significant extent plugged the gap by providing LPs with liquidity which they may not otherwise be getting from distributions. There has been huge growth in "GP-led" secondary solutions, including a large increase in the number of continuation vehicles in the market. Those vehicles allow fund managers (GPs) to move assets from an existing fund into a new vehicle to enable follow-on investments and potentially extended holding periods