LP secondary refers to a transaction where an existing limited partner sells their interest in a private fund to a buyer, who takes over future capital calls and distributions tied to that commitment.

How it works

Unlike a primary commitment—where an LP wires fresh capital into a new or existing fund—a secondary transfers an already-committed position. The seller may want liquidity before the fund exits its companies, to rebalance asset allocation, or to free capital for a new vintage.

Buyers are often secondary specialists or other institutions. Pricing is negotiated against the fund’s reported net asset value (NAV), portfolio quality, and how much unfunded commitment remains. A stake trading at 85 cents on the dollar might reflect weak marks, heavy future calls, or a GP relationship the seller wants to exit.

The fund’s GP typically must consent to the transfer under the limited partnership agreement. The portfolio companies themselves usually do not change; only who sits on the LP register does.

Why it matters

• Founders: You rarely negotiate LP secondaries, but they can shift which institutions hold indirect exposure to your cap table and how patient capital behaves at exit.
• Investors: Secondaries are a liquidity tool for LPs stuck in long-dated funds. They also reveal market sentiment about a GP’s track record when stakes trade at steep discounts.

Common mistake

Assuming an LP secondary is the same as a company secondary, where shareholders sell stock in an operating business. LP secondaries move fund interests, not startup shares directly.

Related ideas

See also LP transfer, LP-led secondary, NAV, and distribution.