GP-Led Secondaries: Liquidity, Control, and the New Playbook

Liquidity under pressure

Private equity is living through a liquidity squeeze. Exit markets are slow, IPO windows are narrow, and distributions have reset to levels not seen in more than a decade. In that environment, GP led secondaries have moved from niche restructuring tool to primary release valve. What used to be a way to clean up stranded assets has become a core method for managing pacing, crystallizing carry, and keeping exposure to the best performing companies without forcing a sale into a weak market.

From extension tool to core portfolio management

A typical GP led secondary transfers one or more mature portfolio companies into a new continuation vehicle. The same GP runs the new structure. Existing LPs can choose to cash out or roll forward into the new vehicle. Functionally, it is a structured recapitalization of midlife assets, a refinancing of the fund rather than a sale of the underlying businesses.

The appeal is straightforward. Traditional ten year fund lives rarely match the longer value creation timelines of today. By resetting the capital base, the GP gets more time and fresh capital without selling strong assets at the wrong point in the cycle. LPs get an elective liquidity window and a clearer choice between recycling into new vintages or staying with companies that already have operating history and visible exit paths.

Pricing power and market imbalance

Right now the balance of power often sits with buyers. There is more supply of GP led opportunities than dedicated capital to absorb them. That shows up as pricing that frequently clears below manager reported NAV, especially where leverage or macro risk is high. For secondary investors who can do the work, that creates appealing entries into seasoned portfolios with real data instead of early stage projections.

For GPs, that same pricing dynamic creates governance risk. In a continuation, the GP is effectively both seller and buyer, moving assets from one vehicle it controls into another. That is why independent valuation agents and fairness opinions have become standard. They help anchor pricing, frame the range of reasonable outcomes, and give the LPAC something objective to lean on when it is asked to approve the deal.

The governance tightrope

Conflicts of interest are baked into GP led transactions, and regulators have focused on that reality. Supervisors have been clear that three elements matter most: disclosure, independent review, and informed consent.

As a result, best practice now looks very different from the early days of extensions. GPs are commissioning third party fairness opinions to confirm that pricing and terms sit within a defensible market range. LPACs are pulled into the process earlier and are expected to review not just economics but also the logic for why these specific assets should be held longer. The GP’s strategic rationale, fee changes, and rollover incentives are documented in full rather than handled informally.

Deals that short change any of these steps risk more than just a difficult conversation. Poor process can create reputational damage with LPs and invite regulatory scrutiny that outweighs the immediate benefits of the transaction.

Strategic rationale – why both sides show up

For GPs, continuation vehicles secure three things at once: more time with assets they like, fresh capital to fund growth or follow on M&A, and continuity of control. Carried interest can crystallize in the old fund and reset in the new one, and new investors can come in at terms that match current conditions rather than vintage year assumptions. Legacy LPs get the option, not the obligation, to take liquidity.

LPs look at the same structure through an opportunity cost lens. Cash out LPs can recycle into newer vintages or different strategies. LPs who roll forward keep exposure to proven managers and companies that are no longer theoretical. For institutions juggling denominator pressure and commitment pacing, GP led deals become one more way to tune portfolio liquidity without dumping assets into the market.

Evolving market structures

The market for GP led deals has split into several recognizable patterns. Single asset continuation vehicles now account for a large share of the activity. They are often built around sector leaders in areas such as logistics, renewables, healthcare, or software where the GP sees a long runway and strong buyer interest over time.

Multi asset recaps remain common at the end of a fund’s life, especially in the middle market, where a handful of remaining companies need more time or capital than the original term allowed. Alongside these, hybrid and preferred equity structures have emerged for situations where common equity valuation is hard to bridge. These structures can provide downside protection for new capital and a path to liquidity for existing LPs without forcing a binary decision.

As comfort grows, more institutions are standing up internal teams to underwrite GP led opportunities directly rather than treating them as a niche separate from other private equity allocations.

What institutional investors should watch

Three themes are likely to shape GP led performance over the next phase of the cycle. First, NAV discipline. As secondary discounts tighten or widen by sector, LPs will pay more attention to how managers mark assets and how those marks compare with transaction evidence. Second, regulatory oversight. Supervisors have signaled a desire for clearer standards on fairness opinions, disclosure of GP economics, and treatment of conflicted situations. Third, capital scarcity. Fundraising remains uneven, and the investors who have dry powder will often dictate structure, terms, and speed.

For LPs, the advantage lies in being selective rather than reflexive. Rolling only where asset quality, governance, and GP alignment all check out is more important than trying to participate in every deal. For GPs, the ability to run a transparent, well documented process will do as much for the next flagship raise as the performance numbers themselves.

ACRE perspective: process is the product

From recent transactions, one theme repeats: the way a GP runs a GP led deal is as important as the headline IRR. The strongest executions start with LPAC engagement well before launch, use independent valuation firms with real sector depth, and keep data rooms open and even handed for all LPs, whether they plan to roll or redeem.

In a market defined by quiet deals and complex motivations, process is not a box to tick. It is the core product. When handled with discipline, a GP led secondary is not a workaround for illiquidity. It is a durable feature of institutional portfolio management that can align time, capital, and control on both sides of the table.