By Chris Cumming

More private-equity managers plan to sell minority stakes in the coming years, as the industry's ongoing downturn drives firms to seek outside investment.

But it remains to be seen whether buyer enthusiasm will match that of sellers.

The market for general-partner stakes -- investments in a private asset manager that typically let the buyer share in management fees and deal profits -- rebounded in 2025 after three lean years. GP-stake deal volume totaled $3.5 billion through the end of October, on pace to easily exceed the record of $3.6 billion set in 2015, according to PitchBook data.

And the market could expand dramatically over the next two years. A survey of fund managers by law firm Dechert showed that 77% plan a stake sale in the next 24 months, up from 34% in last year's survey.

Firms seek outside cash for various reasons: they may need to expand into new business lines, cash out aging partners or fund a larger GP commitment to raise new funds.

The private-equity downturn has added new pressure to sell stakes. A dearth of private-equity portfolio company sales has increased the need for external financing, say people who work on these deals.

But some wonder whether there is enough capital in the market to satisfy the more than three-quarters of managers that plan to sell, and whether firms other than the top performers will be able to access outside money.

"I don't know if every one of the 77% of respondents will ultimately be successful, but I think there is a lot of money sitting on the sidelines that has been raised for this purpose," said Markus Bolsinger, co-head of Dechert's private-equity practice.

GP stakes investing stretches back decades. It was pioneered by institutional investors, in deals such as California Public Employees' Retirement System investment in Carlyle Group in 2001, or the Florida State Board of Administration's investment in secondary firm Lexington Partners in 2010.

But while LPs still take part, the biggest players are now firms that raise dedicated pools of capital to buy GP stakes.

They include Blue Owl Capital, formed in 2021 by the merger of GP-stakes investor Dyal Capital and private-credit firm Owl Rock, Blackstone, Hunter Point Capital and Goldman Sachs' Petershill Partners, which recently delisted from the London Stock Exchange, saying its shares were undervalued.

The biggest fund ever raised for the strategy was Blue Owl's $12.9 billion fifth fund, from 2020, according to PitchBook data. That fund has returned a 12.5% net internal rate of return as of Sept. 30, according to Blue Owl's latest financial report.

GP-stake deals have generally performed quite well, offering capital appreciation as well as a steady income stream, said Lauren Rich, managing director and co-head of strategic partnerships at Wafra, which has been investing in GP stakes since 2012. The firm recently completed an investment in European private-equity giant Ardian.

However, GP-stakes deals tend to be quite complex and therefore have a limited pool of potential investors, said Cees Brouwer, a partner with the private equity and secondaries group at law firm Hogan Lovells. GP-stakes transactions are all privately negotiated and bespoke, requiring a great deal of knowledge of the target firm and its prospects, he said.

"Due to its complexity, the hurdle for this market might be slightly higher than for other markets," Brouwer said.

It also remains to be seen whether a market develops for middle-performing managers. Buyers typically want stakes in only top performers, not the industry's broad middle. For all the prospective sellers to find buyers the market will have to expand, which could happen but is no certainty, according to Dechert's Bolsinger.

While top performers are selling stakes at the moment, "the addressable market is much broader than those trophy assets," he said.

He added that firms can see a range of benefits from linking up with big investors, including improvements in back-office operations and greater professionalization. But stake sales "also comes with things that are not that attractive to the GPs," including reduced fee revenue and carried interest, and "some constraint on your flexibility" regarding firm strategy, he said.

Many firms may have little choice. Limited partners have started demanding larger GP commitments in order to commit to new funds -- money that some GPs don't have on hand, given the dearth of exits, said Wafra's Rich. This "has been a big driver" of GP stake sales, she added.

Write to Chris Cumming at chris.cumming@wsj.com

(END) Dow Jones Newswires

December 24, 2025 06:30 ET (11:30 GMT)

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