The past decade has seen a rapid increase in the number of managers who have raised funds to invest in other private capital managers, referred to as general partner, or GP, stakes.

This article was first published in October 2025 by Law360.

According to McKinsey & Co.'s recent Global Private Markets Report 2025, 43% of the limited partners, or LPs, they surveyed invest in GP stakes funds. Much like net asset value financing's that borrow at fund level secured against the fund's investments and continuation funds that sell assets from one fund to another fund managed by the same manager, selling an interest to a GP stakes fund is now a well-established strategy for private capital managers. Whereas previously managers might have seen a sale to a strategic buyer or an initial public offering as the principal means of realising capital value that they had created in their business — if they sought to realise that value at all, rather than pass it on to the next generation — these days a GP stakes transaction is in many ways the more obvious solution. This article looks at recent developments in the GP stakes market and offers practical advice for managers thinking about selling a stake to an investor.

Recent developments

For a private capital manager, selling an interest to a GP stakes firm has a number of advantages over both strategic sales and IPOs, including the ability to retain a greater degree of operational control over the business than is afforded by a strategic sale, avoiding the scrutiny that comes with a listing, and the public vote of confidence that comes with an investment from a well-regarded stakes investor. While GP stakes firms almost always take minority positions in managers, meaning that the amounts raised are naturally less than on majority transactions, such deals can also lead to a strategic sale or IPO in the longer term, both as a means for the GP stakes firm to exit and for management to realise the value of their remaining equity interests. Increasingly however, the landscape has become more nuanced than this simple picture of liquidity from a GP stakes firm in exchange for a minority investment with limited operational control. For example, GP stakes firms often seek to differentiate themselves from their competitors through the value-add services that they offer, ranging from operational advice on non investment matters, such as procurement or ESG, or assistance with fundraising and introductions to potential LPs.

A recent example is offered by the transaction announced in September between Nuveen Private Capital, a private credit manager, Hunter Point Capital, a GP stakes investor, and Temasek Holdings. Nicholas Page Nuveen Private Capital was formed through the strategic acquisitions by Nuveen of Arcmont Asset Management and Churchill Asset Management in 2023, with the GP stakes investor that had backed Arcmont — Blue Owl Capital, then known as Dyal Capital — exiting as part of that transaction. Ordinarily, one would expect a strategic deal like that to be the end of the story from a GP stakes perspective, but instead two years later Hunter Point Capital has invested alongside Temasek, with Temasek also providing fund commitments. The implication is clear: GP stakes firms have more to offer than just liquidity. Similarly, we are seeing increased interest in the GP stakes market from investors who would traditionally have been LPs, but now are seeking to make their own direct investments. 

According to the McKinsey report, 56% of the LPs they surveyed that invest in GP stakes funds today are considering buying direct GP stakes in the future. That might be a one-off investment into a manager from an existing LP in that manager's funds or the investor may be seeking to acquire stakes in multiple managers, becoming a quasi-GP stakes investor themselves. This is particularly true of family offices with long-term investment mandates, who can present themselves to managers as patient capital, i.e., investors with, in theory, no exit horizon that would otherwise create pressure for them to sell their stake at a certain time in the future.

Compared to direct investments into other industries, where there is less reliance on alignment and personal relationships, and where the specialist knowledge required might be further from the family office's existing skill set, investments into private capital managers are in many ways a natural choice for family offices used to investing as LPs, particularly where the target managers are at the lower end of the assets under management range. GP stakes funds would argue that they can offer a strategic value-add that family office investors lack, and that in reality the number of liquidity solutions open to them, such as strip sales, securitisations and portfolio listings, mean they have much less pressure to exit than other investors with closed-ended funds. However, family office investors can often also commit to being cornerstone LPs in future funds and/or provide funding for GP commitments, which is typically not available from dedicated GP stakes funds, and is more usually seen as a selling point of strategic acquirers.

Steps managers should take

Regardless of the type of investor, the preparatory steps that a manager should take if it intends to sell a stake remain the same. The first step, particularly if there are multiple selling shareholders, is to ensure that all parties are clear on the drivers for the transaction, both on Day 1 and in the longer term, as this will affect the choice of investor. For example, is liquidity the most important factor or are ancillary benefits also relevant? Is future liquidity also needed and over what time frame, and how might this affect the choice of investor? Second, the manager needs to identify what is to be sold: Is it principally selling economic exposure to management fees or will future carried interest and other performance fees be included too? If the latter, thought needs to be given as to how this will be structured if carried interest does not currently accrue to the same vehicle as the management fees, and to how such entitlements to future carried interest might be valued by an investor.

Third, the manager should consider how LPs will react to the transaction and how they may want to influence this reaction. While less of a concern with a minority investment — particularly from a reputable GP stakes investor — than on a majority acquisition the manager may still want to make sure that the transaction is announced at a certain time to optimise communications, e.g., in good time before an investor day or once
fundraising has completed. 

Fourth, the manager should consider how its team will be incentivised going forward, particularly if they currently hold meaningful equity stakes in the business. That may mean that new incentivisation arrangements need to be put in place to create alignment with the investor's time horizon for a capital event. It may also mean that the investment needs to be staggered, or the consideration partly structured as an earn-out to avoid the beach risk that can come with a large payout for the senior management team.

Last, consideration should be given to whether the upstream structure of the selling entities is optimal for tax purposes, given the transaction structure and intended use of the proceeds. It is particularly important to deal with this point as early as possible, so that there is time to evaluate options and implement any necessary structural changes well in advance of a sale.

The terms and dynamics of these transactions vary significantly from deal to deal, and one of the only constants is that they are always complex to execute from a legal perspective. However, if the manager's counsel can ensure that their client has considered the points before starting more detailed term-sheet discussions, that will stand them in good stead for the rest of the negotiations.