In practice
The LPA usually permits distributions in kind, often limiting them to marketable securities and sometimes requiring LP consent or an option to receive cash. Shares are valued at a trading-price average over a set period, which fixes the amount treated as distributed. Lock-up periods may delay sales. Often confused with a secondary sale of fund interests.
An example
Round numbers, not a real fundSay a fund owns 10% of a company that lists. Instead of selling, it gives investors the shares in proportion to their stakes, and they decide when to sell.
Why it matters
It leaves the investor deciding when to sell, and some investors cannot hold shares at all.
A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.