Managed Exits: A Playbook for LPs in Stalled Funds
As private equity funds reach the end of their lives, many Limited Partners (LPs) face a dilemma: how to exit cleanly and profitably when General Partners (GPs) are disengaged, and asset liquidity is low. Managed exits offer a practical solution for LPs in this scenario.
A managed exit involves engaging a third-party specialist to take control or actively manage the fund’s wind-down process, driving value realisation and ensuring a clean closure. This is increasingly relevant for LPs stuck in tail-end funds where the GP’s incentives are no longer aligned with those of the investors.
The playbook begins with triaging the situation: How many assets remain? What is the realistic timeframe for exits? Is the GP actively working to realise value, or is the fund in caretaker mode (fee-driven NAV management with minimal staff)? Institutional LPs bound by fiduciary duties face a binary choice: tolerate incremental value erosion under the incumbent GP or rally LPAC support to put pressure on the GP to renegotiate terms.
To be effective, LPs must mobilise the LPAC or form a consortium to initiate strategic discussions with the GP, ideally 30-40% of interests in capital needs to be behind these initiatives. If the GP is unwilling or unable to act decisively, LPs may use the contractual levers in the documents – audit triggers, key person clauses, or no-fault divorce mechanisms (though these can typically demand 75%+ of LP consensus) or agitate for the appointment of an external manager/ advisor.
In this phase, clarity and coordination are essential. LPs must have a unified goal, legal counsel to help navigate partnership agreements, and a partner with operational capacity to step in and execute. That is where Cork Gully can step in. We specialise in managed exits— advising end-of-life funds, acquiring GP stakes, or purchasing LP positions in funds with a view to active asset realisation. With experience in complex wind-downs, we provide a greater execution certainty, alignment of incentives, and transparency.
The managed exit model offers a range of potential benefits: quicker return of capital, optimised exit valuations, and lower administrative burden for LPs. It also minimises reputational risk, especially in high-profile fund portfolios or where Development Finance Institutions are involved.
A managed exit is not just a last resort — it is increasingly a value-maximising strategy for LPs with legacy positions. The key is early recognition, coordinated LP action, and engaging the right partner with a proven track record.