Experience with buying out an existing LP for a fund?

March 03, 2025

by a searcher from Lake Forest College in Denver, CO, USA

This isnt exactly search fund related, but close enough and I havent stumbled upon this sort of thing in posts or other forums, so curious to get feedback from the group. How would you value or have you heard of a "standard" way to value purchasing into an existing fund? This means buying out an existing LP's shares and determine what the value of the share price is relative to par

Ex. Fund A
- Has been operating against their plan for 5 years and has ~5 years remaining
- 50/50 profit split with GP
- No GP fees/commission/salary
- Shared the past year's financials

Reply by an investor
from Boston College in Boston, MA, USA

Thanks for the shout out, Luke. The investment period for most funds is typically five years, so it sounds as though the fund would be close to if not at the point of being fully invested. On that basis, you'd want to develop your own private valuation of the existing/remaining portfolio companies as a starting point. You'll want to value the portfolio companies based on the selling investors $$ invested in those companies, not including the portion of their LP stake that may have been realized or not invested. You can consider discounting the valuation of the selling investors' stake by a rate determined by your judgement for the proportion of dollars that have been realized and the proportion of uncalled capital. It'll be tough to justify a meaningful discount, but some modest discount should be justifiable, in part because you're providing liquidity. Feel free to reach out at redacted with any questions. Good luck!

Reply by a professional
from The University of Texas at Austin in Dallas, TX, USA

^redacted‌ is completely correct‌

+1 more reply.

Join the discussion