A strip sale transfers part of an LP’s fund interest—specific vintages, unfunded commitments, or defined cash flows—instead of the entire stake.

How it works

An LP might sell 30% of its commitment in Fund III while keeping Fund IV. Buyers price NAV, unfunded obligations, and GP consent rights. GP transfer restrictions in the LPA often require approval; some GPs offer tender programs instead. Strip sales help LPs rebalance without signaling a full divorce from the manager.

Pricing can split unfunded vs distributed strips differently because capital call risk sits with the buyer of unfunded pieces.

Why it matters

• Founders: Indirect effect only—LP liquidity rarely changes how GPs support portfolio companies day to day.
• Investors (LPs): Strip sales improve pacing flexibility but may carry discounts and long closing timelines.

Common mistake

Assuming strip sales are as liquid as public equities. GP consent, ROFR, and bespoke pricing make each trade slow.

Related ideas

Secondary market, LP interest transfer, NAV, and continuation fund.

When you will see it

Endowments and pensions use strip sales to trim exposure to a manager without exiting entirely—common when pacing models shift allocation targets.

Questions to ask

• Does the GP consent to the transfer, and on what terms?
• Is the strip priced on NAV, unfunded, or blended?
• Who bears future capital calls on the sold strip?

Practical takeaway

Treat strip sale as something to define precisely in writing—not assume everyone in the room shares the same meaning. In term sheets, board decks, and LP updates, tie the concept to a concrete decision: a vote, a price input, a fund policy, or a metric formula. When definitions drift, teams misprice risk, miss leverage, or waste cycles on the wrong conversation.