An Evolving Liquidity Landscape
An Evolving Liquidity Landscape
An Evolving Liquidity Landscape
“Liquidity optionality for GP stakes investments is expanding as the asset class matures and structural innovations broaden the range of available exit routes”, says Petershill partner and global co-head Ali Raissi-Dehkordy
One concern that investors have historically leveled at the GP stakes industry is what an ultimate exit might look like. To what extent have those fears proved to be unfounded?
I wouldn’t say the fear is unfounded because historically there has been a tendency in some parts of the market to hold onto assets for a very long time. However, we believe an asset is only worth something if it is generating cashflow and if you’re able to sell it to someone else. Transferability and yield both feed into how we think about value and are important aspects of our underwriting approach.
How do you maximize liquidity potential when underwriting and structuring GP stakes investments?
When it comes to underwriting, we can draw on almost a 20-year history of GP stakes portfolio operating data, while also leveraging the diligence data moat open architecture platform to do our investment diligence on a bottoms-up basis, without relying on GP management team projections. We believe this approach allows us to price investments conservatively and align ourselves with management teams to maximize interim income generation. In addition, the ability to actively seek liquidity has been a core tenet of our approach, building in contractual provisions around free transferability and information rights in all of our contracts. As I said, if it doesn’t produce income and you can’t sell it, then it’s not worth anything, so thoughtful underwriting, coupled with a focus on actively seeking liquidity, has always been the foundation of our approach to realizing value for investors.
What are your exit options as a GP stakes investor?
Since our inception, we have generated over $8 billion of realized proceeds against just over $9 billion of cost, reflecting a focus on creating liquidity opportunities. For instance, the first Petershill fund was fully through a variety of exit routes, culminating with a portfolio sale to Affiliated Managers Group in 2016. Following that, firms like ours have continued to innovate with the industry’s first portfolio securitization in 2019, raising long-dated debt at attractive rates. Private markets firms are generally unlevered at a company level, so being able to optimize capital structures and bring forward future distributions is an attractive option to generate liquidity. We also completed the first permanent capital raise for a diversified portfolio of a GP stakes portfolio in 2021, as well as several asset-level sales of independent firms, whether to management, to consolidators or other GP stakes players. And more recently, we’ve had seven asset-level exits since the start of 2024. So, overall, I would definitely say liquidity in the GP stakes space is continuing to improve.
Do you anticipate further innovation when it comes to driving GP stakes liquidity?
For us, innovation is extremely important whether that means the launch of the first GP stakes fund, the first exit, the first full fund exit, the first securitization or the first company formation. We have grown up in this space, and we keep pushing the boundaries. Not only do we think that GP stakes secondaries will develop in the same way that secondaries markets have developed in other private markets asset classes over the years, thereby significantly enhancing liquidity options, but the emergence of semi-liquid, permanent capital structures may also become a compelling exit path as we seek to move assets from drawdown funds to evergreen vehicles. We think the profile of GP stakes assets fits neatly within these structures given the dual income and total return component. If you offer some degree of liquidity at the vehicle level, we believe that type of offering could be compelling in the semi-liquid space. Investors will be able to choose to hold onto these assets for as long as they want it, defining the length of their own journey. When you pull all this together, in terms of the quality of GPs, the track record of liquidity we’ve been able to generate for fund LPs, plus these new tools coming on-line, the forward trajectory of distributions is extremely positive. In fact, we view this as one of the most exciting times to be involved in the GP stakes industry. We are now in our 18th year, and we are excited about what the next 18 years will bring.
“Deep domain expertise and operational value-add are going to be critical in generating returns in this new era of private equity”
Which sub-segments within the GP stakes market offer the best liquidity optionality and why?
We believe mid-market sector specialists continue to experience a number of tailwinds today. This has been our core target market, with 97 percent of our historical dealflow having taken place in this part of the GP stakes ecosystem. We like these firms because they have not yet reached capacity. They may be the fifth or sixth biggest players in their space in terms of size and yet be one of the best in terms of performance. That means there is a clear pathway for them to continue building their business and engaging with their limited partners in different ways, ultimately making them attractive for investors like ourselves as well as other potential partners in the future. As the number of GP stakes participants has grown in recent years, so too has the group of potential buyers of stakes on a secondary basis. We also find that these mid-market sector specialists tend to have a differentiated toolkit, both in terms of sourcing investment opportunities and in terms of driving value. LPs are therefore increasingly gravitating toward this type of exposure in their portfolios, particularly as the game 28 Buyouts • December 2025/January 2026 within private markets begins to change. We believe deep domain expertise and operational value-add are going to be critical in generating returns in this new era of private equity, one in which GPs can’t rely on cheap financing, free-flowing liquidity markets and multiple arbitrages. Being able to drive down costs and increase revenues, based on a playbook you have built over decades in a particular sector, is going to be more important than ever when it comes to performance in this new private markets environment. At the other end of the spectrum, large, scaled solutions providers with differentiated distribution capabilities are also continuing to attract investor capital by delivering a suite of customized products, and so we are seeing this bifurcation taking place in the private capital industry.
The toughest place to be right now is in the middle – suffering from strong performance in specialist peers and strong distribution in large-scale solutions firms. A lot of firms are trying to find their way out of that space, either by scaling through acquisition or by sizing down their funds and going back to focusing on generating differentiated alpha.
What structural changes have come into the market to make liquidity more achievable?
We believe there could be around $100 billion of AUM sitting in GP stakes funds, much of it at a mature stage in the fund life. The GP stakes industry is therefore following a natural path of evolution, with new liquidity tools coming into the market as the asset class matures and as more and more market participants recognize the long-term attractiveness of GP stakes investments. There are already more GP stakes investors today than there were a decade ago, which will naturally increase the number of potential buyers and secondary trading of GP stakes between sponsors. We think a portfolio like ours is well situated to capitalize on this, given the growth profile of the mid-market GPs that are moving up-market into a segment that peers of ours actively invest in. The increased role of the secondaries market is also changing the liquidity landscape. It isn’t surprising to see growing appetite from secondaries players given that these investments offer both attractive yield and growth upside. We are therefore starting to see specialist GP stakes secondaries players entering the space, as well as secondaries players that have traditionally focused on other areas within private markets. Peers of ours have proven the concept of selling strips of assets to these secondaries buyers as a viable exit path, and it is an exit route that we are currently exploring. There is a growing list of secondaries investors interested in acquiring strips of interests across a portfolio through a continuation vehicle structure. Those investors represent a deep pool of capital, understand GP stakes assets and have a long-term investment horizon that fits well with the ownership of GP stakes.
