GP stakes investing has evolved from a predominantly founder-liquidity solution into a strategic source of capital for PE management companies. The growth of private markets, the launch of new strategies and rising expectations around GP commitment and alignment are creating substantial financing needs, while many firms remain privately owned and have limited access to traditional sources of capital.
As a result, GP stakes investors are increasingly providing capital to strengthen firm balance sheets, support expansion and enable managers to participate in the growth of their own businesses. Firms like Wafra, which have an active GP stakes program, have seen some of their GPs increase their CAGR by 20%, using their deep level of experience and pattern recognition to identify the best emerging managers to get behind.
“We’ve seen what works and what doesn’t work. We have helped raise $12.5 billion for our 32 GPs.” Adel Alderbas, CIO, Wafra.
Red Light Or Green?
Investment selection is increasingly shaped by a barbell structure. At one end are large, scaled platforms offering distribution and multi-strategy solutions. At the other are specialist managers with a clear “right to win” in areas such as digital infrastructure, energy transition, healthcare or other focused sectors.
Generalist firms in the middle may face pressure from both directions, particularly where past returns were supported by multiple expansion or cheap debt rather than durable investment capability. The most attractive growth investments may therefore be managers that are not yet the largest by assets, but rank highly by performance and have the potential to gain market share.
During an engaging discussion in the main plenary session, on Day 2 of IPEM Global, Alderbas commented: “The green light for me is definitely on the emerging manager side, where you have specialist managers. We're seeing it in the data whereby these managers are exceeding their targets, even in this kind of environment.”
“The green light for me is definitely on the emerging manager side, where you have specialist managers. We're seeing it in the data whereby these managers are exceeding their targets, even in this kind of environment.”
For emerging firms, selling a minority stake in the management company can reduce the enterprise risk associated with launching a business, provide the scale needed to attract institutional LPs and support investment in distribution and operations. For established managers, it can reinforce organisational durability, facilitate succession and help ensure that firms continue beyond their original founders.
For investors, the attraction of GP stakes is that it gives them the opportunity to participate in the growth of the management company itself, alongside their existing exposure to the underlying funds, from which they generate yield from a pre-agreed percentage of the GP’s management fees and carried interest.
A Strategic Sounding Board
Ali Raissi, Chairman & Co-Head of Petershill and a partner in the External Investing Group (XIG) within Goldman Sachs Asset Management, explained that the value of the GP stakes partnership extends beyond the provision of capital.
Investors can support fundraising, provide operational expertise and act as a strategic sounding board, while allowing management teams to retain independence and responsibility for running their firms. Successful partnerships depend on both contractual discipline and trust, with experience across managers and market cycles providing a basis for pattern recognition and practical guidance.
Raissi said that there is a keen focus on ensuring whoever Petershill backs is not only a great investor “but a great entrepreneur”. He explained that when it comes to supporting the management teams they invest with, its a bit like being an orthopaedic doctor to Michael Jordan or Killian Mbappe.
“They are the world’s expert at what they do - healthcare, private equity, infrastructure, whatever it is. But you happen to know more about the business of the business. And so you're kind of their doctor on some of this stuff. I'd say the best relationships that we have are the ones that are the most iterative,” said Raissi.
To avoid concentration risk, GP stakes investors look for GPs who are not dominated by one single individual but rather have multiple layers of partners in place. If you walk into a board room, sit opposite a group of five or six partners and only one person dominates the conversation while the rest sit silent, that is a clear warning sign.
GP stakes is the ultimate expression of partnership. After all, the GP has agreed to sell part of its business to an external investor. This goes one level higher than a typical GP/LP partnership. There has to be a clear roadmap for future growth within the management company when the original founders decide to retire. This will inevitably lead to disputes and disagreements along the way, but both Raissi and Alderbas agreed that these are human relationships and should not be entirely dictated by the partnership agreement.
“I think 85% is actually not the documentation its the relationship. 15% is the documentation. Once you go back to the documentation and try to see who's right or who's wrong, the relationship is done,” said Alderbas.
Allocation of equity to the wider team can support retention, alignment and continuity.
In this respect, GP stakes capital can strengthen, rather than weaken, alignment with LPs by encouraging firms to reinvest in the platform and build businesses capable of extending beyond their original leadership.
A 3-D representation
Raissi noted that GP stakes investing combines characteristics of private credit, private equity and infrastructure.
One can think about GP stakes in three dimensions.
One is yield, in line with private credit (mid teens yield). One is MOIC, which is in line with private equity; so around 2.5x returns. And the third dimension is duration, which is in line with infrastructure; here, the underlying return comes from the duration of LP contracts, which are secured and tend to run for 10 years or more.
“The only other asset that generates lower yield of that kind of security is infrastructure. So you have this aspect of private credit, aspect of private equity aspect of infra and I think that makes GP investing pretty unique,” remarked Raissi.
Across a vast array of engaging panel discussions and presentations IPEM delegates were treated to some of the most engaging, forward-looking views from many of the industry’s leading experts. Here are a few more snapshots on what came out of yesterday’s sessions:
Coinvesting
Co-investing is evolving from an opportunistic allocation tool into a sophisticated form of strategic capital, in which access to the strongest opportunities increasingly depends on proactive engagement, sector clarity, underwriting capability and certainty of execution.
Continuation vehicles, particularly single-asset transactions, are reinforcing this shift: while they can create tension around valuation, economics and alignment, they are increasingly recognised as valuable tools for liquidity and value maximisation. The direction of travel is towards longer-term, repeatable GP/LP partnerships, in which co-investors act as credible capital-solution providers rather than passive syndicate participants.
Next Gen GPs
When it comes to investing in the next generation of emerging managers and spin-outs increasingly shaping private equity, Elizabeth Weymouth, Founder of Grafine Partners, Eric Zoller, Co-Founder and CEO of Taproot Capital, and Richard Golaszewski, Co-Head of GP Financing Solutions at Hunter Point Capital, converged on a common thread: these are not first-time entrepreneurs fresh out of the garage, but seasoned investors with 10-15+ years of deal experience. Weymouth noted "next gen GPs" with senior deal experience have historically outperformed later-vintage funds, calling it a "generational shift." Golaszewski added that Hunter Point tracks these groups from day one, prioritizing "investment excellence" — leadership, confidence, and delivery — over pure returns.
On sourcing and evaluation, all three emphasized relationships over process.
Catalytic capital in action
One key theme emerged from this panel: climate investing does not need to choose between impact and commercial discipline. Catalytic capital can help bring more institutional investors into strategies or markets they may otherwise avoid. Rather than funding uncommercial projects, it can improve the risk-return profile for other investors and make participation easier to justify. The energy transition is also no longer driven by decarbonization alone. Energy security and growing electricity demand, especially from digital infrastructure and AI, are creating additional reasons to invest in new power capacity and resilient systems.
The discussion also highlighted the importance of building long-term investment ecosystems. Capital is most effective when it does more than fund individual transactions. It should help create a market where experienced investors, local operators, smaller managers, and future buyers can all participate. The opportunity is not simply to deploy more capital. It is to use it in ways that make climate investment repeatable, scalable, and commercially sustainable.
What tomorrow’s private market investor expects
Private markets have made significant progress in opening access to a wider investor base. Evergreen funds, interval funds, ELTIFs and private-market ETFs have created new ways for wealth investors to participate in strategies once primarily reserved for institutions. Accessibility must be matched by a strong client experience. Investors need transparency around liquidity, valuation, fees and risk, as well as education about how private-market allocations behave over time. This will require different approaches for different investors. Some will prefer a simple, diversified solution that is ready to use. Others will want customized portfolios and adviser-led selection. Both models will need reliable distribution, strong operational infrastructure and clear communication.
But access is no longer the main challenge. The next phase will be defined by portfolio construction. Investors do not simply need access to a single private credit, infrastructure or private equity fund. They need diversified solutions that combine strategies, liquidity profiles and return objectives in a way that fits their broader portfolio. The portfolio era will depend on collaboration. Governments, regulators, platforms and GPs need to align so product innovation is supported by distribution, education and investor protections.
Private markets are no longer only about expanding access. They are about turning that access into portfolios investors can understand and use with confidence.
