Private equity fund managers have had to confront unprecedented challenges as a result of the market dislocation and volatility caused by COVID-19. They have had to revisit their business plans as segments of their portfolios require injections of capital and, in some cases, more time to ride out and recover from the economic turbulence. These challenges are particularly testing for managers with older vintage funds that may have a limited ability to call further capital from their investors.

To further complicate matters, managers may be faced with investors who are having to deal with their own liquidity pressures and are exploring ways to reduce their exposure to private equity as an asset class.

Fortunately, in recent years the funds industry has developed a number of tools to help managers deal with these unforeseen scenarios. These are commonly referred to as general partner-led, or GP-led, liquidity solutions. This article, which first appeared in the October 2020 issue of PLC Magazine, looks at:

  • How the structure of PE funds contributes to certain liquidity issues
  • The growth of GP-led liquidity solutions
  • The most commonly cited GP-led liquidity solution: the GP-led secondary fund restructuring
  • Some of the other liquidity solutions available to general partners

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