The DPI problem and how secondaries address it for LPs

DPI, distributions to paid-in capital, measures how much cash a fund has returned relative to what investors contributed. It has become the metric LPs care most about because distributions have been weak for four years. Bain's Global Private Equity Report 2026 found distributions running at about 14% of NAV in the twelve months to Q3 2025, below 15% for the fourth year running and the lowest sustained level since 2008 to 2009. Secondaries address the problem directly: a sale of an LP interest converts unrealised NAV into cash today, at a discount, and a continuation vehicle offers the same choice on a single asset. Neither creates value; both change when it is realised.

The distribution data

Bain reports that around 32,000 unsold companies worth $3.8tn sit in buyout portfolios, that the average holding period at exit has lengthened to about seven years from five to six years over 2010 to 2021, and that almost 40% of companies have been held for more than five years, up from 29% in 2019. Exit value recovered in 2025, to $717bn, up 47%, but seven exits above $10bn accounted for $155bn of that, and the number of exits fell 2%. Recent vintages, 2017 to 2021, have DPI below the median of the 2010 to 2017 vintages at the same age.

PitchBook's Q2 2026 fundraising report frames the same problem in cash terms. Across private capital, the net cash flow to LPs (distributions less contributions) was negative $428.6bn in 2023, the largest deficit since its records began in 1997. 2025 was the smallest deficit of recent years and close to break-even, which is an improvement but not yet a positive flow. Ropes & Gray's H1 2026 update put annual distribution yields near 10%, against a long-term average of about 25%.

The effect on LPs is measurable. Bain found 53% of LPs said undrawn commitments limited their capacity for new commitments, up 15 percentage points from the end of 2024. The Coller Capital Summer 2026 Barometer found 40% of LPs think GPs do not provide liquidity early enough. The broader data is set out in the distributions drought in data.

How a secondary sale changes DPI

Consider an illustrative position, constructed for this article and not drawn from any fund. A family office committed $10m to a 2018 vintage buyout fund. The fund has called $9.5m, distributed $5.5m and reports remaining NAV of $7m. Its DPI is 0.58x ($5.5m / $9.5m) and its TVPI is 1.32x.

Illustrative figures. Pricing from Jefferies' July 2026 review; other numbers are assumed.

The sale lifts DPI from 0.58x to 1.25x in a single quarter. The cost is the discount, $630,000 at 91%, and the loss of any future gain on the $7m of NAV. Whether that is a good trade depends on what the seller believes the fund will deliver and when. If the remaining companies exit in two years at a 1.3x uplift to today's NAV, holding would produce $9.1m against $6.37m from selling. If exits slip to five years or values are written down, the sale looks better. The decision is a view on the NAV, and the discount is the price of certainty. A fuller comparison of a sale against a loan is in selling versus borrowing.

How a continuation vehicle changes DPI

In a GP-led continuation vehicle, the old fund sells one or more companies to a new vehicle, and the proceeds are distributed to the old fund's LPs. For the LP who takes cash, DPI rises in exactly the same way as in a sale, usually at a smaller discount: Campbell Lutyens' 1H 2026 report found 69% of single-asset vehicles priced at par or better. For the LP who rolls, the distribution is reinvested on the same day, so the net cash position does not change even though the old fund's reported DPI goes up.

That distinction matters when reading GP track records. Bain notes continuation vehicle value rose 62% in 2025 but remains under 10% of exit value, so most DPI still comes from conventional exits. Where a GP's DPI has been helped by continuation vehicles, an LP should ask how much was cash to third parties and how much was recycled. The structure is explained in GP-led continuation funds, explained for LPs.

What DPI cannot tell you

DPI is a realisation measure, not a return measure. A fund can have a high DPI and a poor final multiple if it sold its best assets early, and a low DPI with a strong portfolio that has simply not exited. For a family office the useful discipline is to track DPI by vintage against a benchmark and to decide in advance at what discount a sale is acceptable. In a market where Jefferies recorded $56bn of LP-led volume in six months, the option to sell is real, and its price is published every quarter.