LP-Led vs. GP-Led Secondaries:
Who's in the Driver's Seat?

In a private equity secondary sale, who initiates the deal? Is it the investor (LP) or the private equity fund manager (GP)?

The answer defines two very different transactions that are reshaping the private equity landscape.

1. The Traditional Approach: LP-Led Secondaries

This is the classic secondary sale.

• Who drives it? The investor (Limited Partner).
• Why? The LP needs liquidity to rebalance their portfolio, free up cash, or exit a manager for another reason.
  
• The GP's role: Typically passive. The transaction is driven by the LP's needs.

2. The Modern Evolution: GP-Led Secondaries  

This type of secondary flips the script.

• Who drives it? The fund manager (GP).
• Why? A common reason is that the GP wants to hold an asset(s) longer than the fund's life to maximize its growth, but some LPs need their money back.
• How it works: The GP structures a deal. One example is through a continuation fund, which buys the asset(s) from the old fund. Existing LPs can either cash out or "roll" into the new vehicle. Other creative structures like strip sales or preferred equity, offered by firms such as Dawson Partners, can also generate liquidity as well.

The Key Distinction: 

LP-Led = Driven by an investor's need to exit.
GP-Led = Driven by a fund manager's desire to continue holding an asset.

Both are powerful liquidity tools, but GP-led secondaries introduce unique complexities around valuation and conflicts of interest that require intense due diligence.