LP-Led Secondary
When a limited partner independently sells their fund interest to another buyer.
Definition
An LP-led secondary occurs when a limited partner decides to sell their interest in a fund, typically through a broker or direct negotiation with a secondary buyer. The GP is not initiating the transaction but must usually approve the transfer. LP-led secondaries happen when LPs need liquidity, want to rebalance their portfolio, or are dissatisfied with fund performance.
Why it matters
LP-led secondaries are a normal part of the venture ecosystem and generally do not affect employees. However, large-scale LP selling in a fund that holds your company's shares could signal broader concerns about the portfolio or market conditions.
Example
A pension fund LP needs cash for other commitments and sells its $25M interest in a VC fund to a secondary buyer for $22M (a 12% discount). The GP approves the transfer, and the new LP inherits all future distributions.