Why it happens · LPs in venture & PE funds
LP liquidity in fund structures
Limited partners in a venture or private equity fund can't just sell 'the fund' on an exchange. Instead, an LP-led secondary sells their entire limited partnership interest — the remaining, undistributed value across the fund's whole portfolio — to a specialist secondary buyer, typically at a negotiated discount to the fund's reported net asset value. This is the largest single category of the global secondary market by dollar volume.
Worked example
A worked example of an LP-led fund-stake sale (illustrative figures):
- An LP committed $10 million to a venture fund. $6 million has been called and invested so far; the GP's latest marks put the current net asset value of that stake at $9 million, with $4 million still unfunded and subject to future capital calls.
- A dedicated secondary buyer offers 85% of NAV — $7.65 million — for the LP's entire remaining interest, and in doing so also assumes the $4 million unfunded commitment.
- The selling LP receives $7.65 million today instead of waiting years for the fund to distribute proceeds as it exits portfolio companies — and is no longer on the hook for the $4 million in future capital calls.
- The buyer's underwriting case: if the fund's portfolio ultimately returns something close to its current $9 million mark (or more) over the following several years, paying $7.65 million today plus funding the $4 million in future calls can still clear an attractive return relative to a primary fund commitment made from scratch.
Where this goes wrong
Institutions sometimes approach a sale as a single decision when it is really two: what to sell and how to run the process. Selling a package quietly to one buyer is faster and usually cheaper in price; running a competitive process takes longer and typically produces a materially better one. The choice between them is the biggest controllable variable in the outcome.
Frequently asked
How long does an LP stake sale take?
Commonly a few months from mandate to closing, driven by diligence access, manager consent and documentation rather than by finding a buyer. Timelines compress when the portfolio is well documented and the manager cooperates.
Does the fund manager have to approve the sale?
In effect, yes. Transfers of fund interests require manager consent under almost all partnership agreements, and the manager also controls the information a buyer needs to price the stake.
See every reason a secondary sale happens, or go back tohow a deal actually works step by step.