Selling LP Interests and Fund Commitments: Should You Hire an Advisor or Sell Direct?

At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. Whether you’re selling a portfolio, single fund commitment, or co-investment, our team is here to help. Contact us today to start the conversation.

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Introduction

Limited partners (LPs) in private equity, venture capital, and other closed-end funds increasingly look to the secondary market for liquidity. Selling a single fund commitment or a portfolio of fund stakes can unlock capital for redeployment, rebalance portfolios, or meet near-term liquidity needs.

But LPs face an important decision: should they run the sale process themselves—contacting secondary buyers directly—or engage a specialized advisor to manage the process? The right approach can determine not only the price achieved but also execution certainty, confidentiality, and GP relationship management.

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What “going it alone” means for LP sales

• Direct outreach: The LP contacts one or a few secondary funds directly, often based on prior relationships.
• Simplified execution: The LP negotiates transfer price and terms bilaterally with a buyer.
• GP consent: The LP coordinates with the GP for transfer approval, usually without third-party involvement.
• Cost savings: No advisor fee.
• Limitations: Without competitive tension, pricing may be materially lower, and execution risk higher if a buyer drops out.

Going alone can work for smaller transactions—such as selling a single, straightforward fund commitment to a known buyer.

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What an advisor brings to LP-led secondaries

Market access and buyer universe

• Secondary advisors maintain relationships with dozens of dedicated secondary funds, institutional investors, and specialized buyers.
• They can access a broad buyer base quickly, creating competitive tension.

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Pricing and valuation discipline

• Advisors benchmark bids against current market levels and recent comparable trades.
• They can identify whether NAV discounts are in line with market clearing levels.
• They educate clients on technical aspects such as roll-forwards, record dates, and transfer agreements.

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Process management

• Advisors handle distribution of offering materials, NDAs, and data-room management.
• They coordinate timelines to secure multiple bids simultaneously, improving comparability.

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Negotiation and structuring

• Advisors manage detailed negotiations around deferred payments, earn-outs, unfunded commitments, and transfer mechanics.
• They help balance certainty of close with price maximization.

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GP relationship management

• Advisors assist in positioning the sale with the GP to secure consents smoothly.

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Pros of hiring an advisor

• Higher pricing: Competitive auctions typically reduce discounts by several percentage points versus bilateral sales.
• Execution certainty: A broader buyer pool reduces the risk of deal failure.
• Governance cover: For institutional LPs, an advisor-led process demonstrates fiduciary duty.
• Time savings: Internal staff avoid managing dozens of buyer interactions and diligence requests.
• Better structuring: Advisors can improve outcomes beyond just headline price.

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Costs and downsides of hiring

• Fees: Typically 1–3 % of transaction NAV, with minimums for smaller deals.
• Confidentiality risk: Broader outreach increases the chance of market leaks.
• Loss of control: Advisors may run a wider process than an LP intended.
• Fit and quality: A weak advisor can hurt pricing or GP relationships.

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When “going it alone” makes sense

• Single, small fund sales where the NAV is too low to justify advisory fees.
• Pre-arranged buyer (e.g., another LP in the same fund) with clear valuation.
• Experienced LP team with long-standing secondary relationships.
• Low-complexity transfers with minimal unfunded commitments or side letters.

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Decision framework

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Best practices if hiring an advisor

• Industry focus matters: Choose advisors with deep secondary-market experience, not just general M&A.
• Fee clarity: Ensure fees scale appropriately. At F2H, we do not charge a retainer.
• Confidentiality protocols: Require strict controls on buyer outreach.
• GP alignment: Involve the advisor early in GP communication strategy.
• Stay engaged: LPs should review buyer lists and term sheets rather than fully outsourcing.

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Conclusion

For LPs selling fund commitments, the decision to hire an advisor depends on deal size, complexity, and internal capacity. Advisors typically deliver higher pricing, stronger execution certainty, and governance protection—especially for large or complex portfolios.

For smaller, bilateral trades, going it alone can be cost-effective and efficient. Ultimately, the choice is between maximizing value through structured competition or saving cost through simplicity. LPs should weigh advisory fees against the potential uplift in price and execution certainty.

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At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. Whether you’re selling a portfolio, single fund commitment, or co-investment, our team is here to help. Contact us today to start the conversation.

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