GP stakes have moved from niche bet to mainstream private markets strategy, as investors increasingly back managers directly rather than just their funds.

Transactions involving private markets GPs reached a record high of 164 deals in 2025, a 40 percent year-on-year increase, per placement agent Campbell Lutyens.¹ In the five years from 2020 to 2025, deal count has climbed by almost 60% with most of the buyers being strategic acquirers, followed by GP stakes specialists.

Philip Meschke, Head of Private Equity at Moonfare, breaks down why GP stakes have become such a compelling strategy including real cash returning to investors, mid-market managers driving the growth and the structural forces making target GPs more willing partners.

Philip, in your view, what makes GP stakes an interesting private markets strategy right now?

Private markets have become a core asset in many portfolios, but the exposure most investors get is limited to fund investing which is a claim on the returns of the underlying portfolio companies inside a single vehicle. GP stakes offer a structurally different exposure: a claim on the manager itself, which captures both the equity value but also cash distributions from management fees and carry across an entire platform of funds.

This generates differentiated DPI streams, and in a market where distributions to LPs have stalled broadly, we see this as a uniquely attractive feature.

What are the market conditions for GP stakes currently? Are they more favourable today compared to two years ago?

I see a few factors that have been moving independently, but in the same direction.

The first is that GP stakes have matured and are following roughly the same arc secondaries went through a decade earlier. For example, these funds are collecting ever-larger vehicles (Blue Owl raised $12.9 billion in 2022 for its fifth fund, the largest dedicated fund in the category²) with deal volume following the same trajectory.³

GPs are more comfortable with the mechanism, and what started as a niche and opportunistic approach is now becoming a standard piece of manager-level financing.

The second is more directly tied to current conditions. GPs themselves are liquidity-constrained. Exit assumptions built into fund plans several years ago haven't played out, carry that was expected hasn't come through on schedule but commitments into new funds still need funding. That gap gets closed either with a bank facility or with a GP stakes investor — and the latter brings an alignment that a lender typically doesn't offer.

A third, more forward-looking driver is platform diversification. Established managers are increasingly launching adjacent strategies. A healthcare buyout manager, for example, could extend into healthcare-tech. This is now the territory of so-called GP seeding but it draws on the same underlying capital need. Spin-out activity is elevated as well; it doesn't feed GP stakes directly today, but it's building the pool of managers who'll be eligible candidates a few years out.

This leads me to my next question: why would a manager give up equity to a GP stakes investor in the first place? What's in it for them?

There are a couple reasons. The first is growth capital. A firm could need money to fund its own GP commitment into a new, larger fund, or, as mentioned, to seed a new strategy adjacent to its core business.

The second is succession when ownership sits with an aging founder generation while the operating partners who run the business hold little to no equity. That misalignment eventually has to be addressed, and a GP stakes transaction is one of the few mechanisms that lets it resolve at a market-set price rather than through an internal negotiation with no external reference point.

A third, less common rationale is access. Partnering with an investor for a specific capability, a distribution channel for instance, is sometimes worth more than the equity that’s given up.

Most GP stakes firms are focused on mid-market targets. Why is that so?

Because growth and scale typically pull in opposite directions past a certain size. Largest managers would need to add tens of billions in new commitments every year to maintain AUM growth at historic rates. This is very difficult regardless of how good the platform is. It’s more likely they will track the broader market's growth rate, which is strong but not exponential.

The exponential outcomes sit with managers who are still small enough that a single successful fund can double their AUM base. That’s a bet on a specific manager moving from one AUM bracket to the next, which is where both the equity appreciation and the fee-stream growth are steepest.

As a result, mid-market specialists like Bonaccord have been among the most active dealmakers in the space.

Looking now from a perspective of an LP — why should investors consider GP stakes instead of simply buying a public alternative-asset manager?

Both structures earn fees and carry off the same platform but the question is whether that value reaches you as cash or stays trapped as potentially retained earnings.

Public private markets managers retain discretion over what gets distributed versus reinvested. In practice a meaningful share of earnings gets retained rather than paid out: public alt-manager dividend yields run in low single digits.

A closed-end GP stakes vehicle doesn't have that discretion built in the same way; they’re structured to distribute what they collect, and the realised yield is closer to 9–11%. It’s the similar underlying economics but a different mechanism for getting that value to the investor.

The cash-yield case is clear. But how do GP stakes firms sell their investments and realise the capital-appreciation side of the return?

There are different exit routes. Most common are sales to another GP stakes manager, sovereign wealth fund or specialist manager expanding into the space. We’ve also seen a public listing and GP-led secondaries where the asset is rolled over into a continuation vehicle and where investors self-select into holding or exiting. It's worth acknowledging the strategy is still relatively young and has only scaled meaningfully in the past decade.

Yet the trajectory on exits so far looks promising. Legacy owners are releasing equity - GP stakes once held by banks and other strategics are increasingly changing hands. A secondaries market for GP stakes is also developing, seen in Petershill's exit from Harvest Partners and Wafra's stake sale in Ardian while GPs themselves are increasingly buying back their own equity.

Would you say GP stakes are more of a core allocation or a complementary satellite position?

Many view GP stakes as a satellite allocation. I think that’s a reasonable approach given we’re talking about a still-emerging strategy. But I'd separate familiarity from portfolio function. On function, GP stakes offers exposure that's differentiated to what's already sitting in a typical private markets portfolio, plus a cash-yield component that's typically absent elsewhere in the portfolio. These are the kind of characteristics that many investors could see as pointing toward core status rather than satellite.

PEI International recently wrote that the GP stakes can be an attractive option for private wealth. What benefits - and risks - do you see here for individual investors?

The benefits map to exactly what individual investors typically lack in private markets. First, cash flow: management fees generate distributions early in a fund's life, softening the J-curve that deters many individuals from traditional PE. Second, diversification: a single GP stakes position carries exposure to fee and carry streams across dozens of underlying funds, strategies and vintages, breadth no individual could assemble directly. And the strategy has institutional backing: McKinsey recently found 43% of LPs now allocate to it.⁴

The risks deserve equal weight. These are minority stakes in private partnerships. There is no traded market price, though precedent transactions provide meaningful reference points, and interim valuations still involve judgment.

Duration is long, and the exit track record, while developing well, is shorter than in buyouts or secondaries. Most importantly, fee streams depend on future fundraising, so investors are underwriting not just a manager's existing funds but its ability to keep growing. That argues for accessing the strategy through experienced managers with disciplined underwriting, not treating it as a yield product.