How selling an LP interest works: process, timeline and costs

Selling an LP interest is a private, consent-based transaction that normally takes one to two quarters from decision to cash. The seller assembles fund documents, usually appoints an adviser to run a bid process, agrees a price expressed as a percentage of the fund's most recent quarterly NAV, signs a purchase and sale agreement with the buyer, and then obtains the general partner's consent through the GP's own transfer agreement. Morgan Lewis's Limited Partner Secondary Sales 101 notes that deals generally close at quarter end and that planning should start one to two quarters ahead, especially for larger sales.

Step one: preparation and the data room

The first job is internal. Confirm who approves the sale (the board, the investment committee or the principal) and decide which interests to sell. Morgan Lewis lists the data room contents a buyer will expect: the limited partnership agreement and side letters, subscription documents, fund financials, three years of tax returns or K-1s, and any material correspondence with the GP. Special features need flagging early, including alternative investment vehicles, blocker entities, opt-outs, pending distributions and withholding issues.

Herbert Smith Freehills Kramer's guide to LP-led secondaries adds that refreshed seller KYC and buyer KYC can take considerable time, so both should start before marketing. Sellers typically draft the purchase and sale agreement with their own counsel and place the form in the data room so bidders mark it up rather than start from scratch.

Step two: advisers and the bid process

Most sales of any size are intermediated. Evercore's H1 2026 review found that 88% of LP-led volume ran through an adviser-led process with multiple bidders. The adviser's engagement letter sets out its role (running the auction, contacting GPs, handling NDAs and the data room) and a transaction-based fee, usually with a tail if the seller later closes with a bidder the adviser introduced. Morgan Lewis does not publish a standard fee percentage, and neither do the advisers.

Bidders sign NDAs, and confidential fund information can only be shared with GP consent. First-round bids specify the interests wanted and a price. A round of markups to the purchase agreement usually follows, which separates serious buyers from the rest. Where a portfolio is sold, pricing covers the allocation across interests, including those that may be caught by a right of first refusal.

Step three: price, reference date and the purchase agreement

Price is quoted as a percentage of NAV at a reference date, normally the fund's last quarterly valuation. Jefferies' July 2026 review put the H1 2026 average for LP portfolios at 87% of NAV, and Campbell Lutyens' 1H 2026 report recorded an average discount of 13.3%. The headline price is then adjusted: capital the seller contributes after the reference date (including management fees) is added, and distributions the seller receives after it are deducted. How the discount varies by fund type is covered in secondary pricing by strategy.

The purchase and sale agreement covers the rest. Morgan Lewis describes the usual terms: representations on authority, title, absence of defaults and funded capital calls; interim covenants between signing and closing; excluded obligations the seller keeps, such as pre-closing taxes and clawback of pre-reference-date distributions; and mutual indemnities with caps and baskets. Buyers increasingly ask to pay part of the price later. Ropes & Gray's H1 2026 update reports that about a third of LP-led deals include deferred payments, most settling within 12 months. A seller accepting deferral becomes a creditor and should negotiate security or acceleration rights.

Step four: GP consent, transfer documents and closing

The GP's consent is almost always required under the LPA. Each GP has its own transfer agreement, signed by seller, buyer and GP, and the buyer completes the fund's subscription documents and investor questionnaire. Many LPAs include a notice period (Morgan Lewis gives 30 days as an example) and some include a right of first refusal in favour of the GP or other LPs, which must be run before closing. Sellers normally ask for a release from future obligations and GPs often resist. Legal opinions on the transfer are usually required by the LPA and usually waived.

For English and Scottish limited partnerships, HSF Kramer notes that a Form LP6 and a Gazette notice are filed after transfer, typically by the GP. The restrictions and tax points are set out in transfer restrictions and tax in LP sales.

Timing column is a general description based on the Morgan Lewis and HSF Kramer guides, which give no week-by-week schedule.

Costs

Three cost lines matter. The adviser's fee is transaction-based and negotiated. GP counsel costs are typically split equally between buyer and seller, and payment is often a closing condition. The seller's own legal and tax advice is the third. Set against these is the discount itself, which is usually the largest cost of a sale.

A sale is one of two main routes to liquidity from a private fund portfolio. The alternative of borrowing against the portfolio, and how the two compare, is discussed in selling versus borrowing.