GP-led and LP-led transactions are two ways to buy and sell stakes in long-term funds and private companies. GP-led transactions are becoming more popular due to market volatility but are less efficient and offer lower fees for the GP
Summary:
The GP and LP-led transactions are two distinct liquidity options for investors in the secondary market, where both stakes in long-term funds and private companies change hands. GP-led transactions have become more popular in recent years due to market volatility caused by the Covid-19 pandemic. In a GP-led transaction, the GP controls the timeline and is responsible for creating the liquidity in the portfolio, while in an LP-led transaction, the LP controls the timing, and the GP is hands-off. GP-led transactions are less efficient but offer lower fees and start at lower carried interest rates with higher carried interest hurdles, which creates a “double benefit” for the GP. However, GP-led transactions lack some of the fundamental characteristics that secondaries are supposed to deliver and don't offer much of a discount for the buyer.
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Reference:
- https://www.institutionalinvestor.com/article/b2022zq08nfrzz/GP-Led-Secondaries-Are-Having-a-Moment-But-Don-t-Discount-the-Traditional-Market#:~:text=In%20an%20LP%2Dled%20transaction%2C%20a%20buyer%20and%20a%20seller,LP's%20interest%20to%20the%20buyer.
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