Secondaries Explained

Reference · Deal types & structures

Strip sale

A GP sells a slice ("strip") of several portfolio positions at once — often to generate DPI for LPs without giving up whole assets.

Worked example

A worked example of a strip sale across a portfolio (illustrative figures):

  1. A fund holds eight portfolio companies with a combined NAV of $200 million. Rather than selling any single company outright, the GP sells a 15% strip across all eight simultaneously to a secondary buyer.
  2. That 15% strip is worth $30 million (15% × $200M), which the GP distributes to LPs as cash — directly improving the fund's DPI without triggering a full exit (and its associated loss of control) on any one asset.
  3. The buyer gets diversified exposure across eight companies in a single transaction, rather than negotiating eight separate deals — efficient for both sides, which is part of why strip sales have grown alongside GP-led continuation funds as a standard liquidity tool.
  4. Because the GP retains 85% of each position, it keeps its existing governance rights and board seats across the whole portfolio — a key difference from a continuation fund, where specific assets move entirely into a new vehicle.

Where this trips people up

A strip sale is easy to confuse with a continuation fund. In a strip, the manager sells a slice across several holdings while keeping the rest, and the fund itself continues. The valuation question is different too: the buyer is pricing a cross-section of a portfolio rather than one asset it has underwritten in depth.

Frequently asked

Why would a manager sell a strip rather than a single asset?

To return capital to investors without picking winners or breaking up the portfolio. It provides liquidity proportionally while the manager keeps managing all of the same companies.

Is a strip sale a signal about the portfolio?

Mainly about the manager's need to show distributions, rather than about any single company. Reading it as a judgement on specific assets usually over-interprets it.

See the full glossary entry, or browseevery term.