Glossary · Fund life

What is an LP-led secondary?

An LP-led secondary is a sale by an investor of its stakes in one or more funds to a buyer, often to raise cash or rebalance its portfolio.

In practice

Pricing is usually quoted as a percentage of the latest reported NAV, adjusted for cash flows since that date. The GP typically must consent to the transfer under the LPA, and the buyer takes on any unfunded commitment. Often confused with a GP-led secondary, where the manager runs the process, usually moving assets into a continuation vehicle.

An example

Round numbers, not a real fund

Say a pension plan sells fund stakes carried at $500 million to a secondaries buyer for $450 million. The buyer takes over the stakes and their future payments.

Why it matters

It gives investors a way out before a fund ends, usually at a discount or premium to the reported value.

A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.

Related terms

GP-led secondaryA GP-led secondary is a deal run by a fund manager to move assets out of an existing fund, usually into a continuation vehicle, with new investors buying in.
NAVNet asset value, or NAV, is a fund’s assets minus its liabilities. In private funds it is usually reported quarterly and rests on the manager’s valuations.
CommitmentA commitment is the total amount an investor legally agrees to provide to a fund, which the manager draws down gradually through capital calls.
Tender offerA tender offer is a bid made directly to holders to buy their shares or fund interests at a stated price within a set time window.
LPAThe limited partnership agreement, or LPA, is a private fund’s main contract. It sets the fees, carry, investment limits and the rights of the manager and the investors.

The terms, in the news each morning.

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