General Partner Stakes: Why Investors Are Buying Into the Business of Private Equity

Investors have long appreciated the business model that is asset management, but historically, the only way they could gain exposure was through publicly traded asset managers.

The challenge is that those stocks tend to be very volatile, exhibit high correlations to the rest of a typical investor's portfolio and usually do not provide much in the way of cash flow to their stockholders.

Yet the amount of assets invested in the private markets has grown by more than four times over the past 14 years, and most expect another doubling in the next six years. If that is true, one of the best ways to benefit from that growth would be to own the firms that get paid to manage those new assets.

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But is there really no choice but to invest in the public markets, where investors tend to be fixated on the 90-day earnings cycle, which can create as much as 50% more price gyration than the average stock?

In fact, there is another choice for investors seeking exposure to the growth of private markets, one that can capture the actual economics without the noise.

That path is GP stakes.

The growth capital thesis

At its core, a general partner (GP) stake is a minority equity investment in an alternative asset management firm. The investor becomes a partner in the management company itself, participating in management fee revenue, carried interest (revenue generated through sharing in positive performance delivered to investors) and returns on the GP's own capital deployed into its funds.

Many of the top private asset managers have a desire to expand their businesses and will seek growth capital to help them accomplish that objective.

That said, not just any firm can attract the capital from sophisticated investors. The managers who can attract GP stakes capital are typically top-tier firms with proven track records, institutional client bases and significant runway ahead.

Those that are able to attract GP stakes capital are able to seed new strategies, expand into adjacent asset classes and invest in the infrastructure that can help them grow their business. The capital is patient, the alignment is genuine, and the partnership is long term.

This is why the space has historically attracted only the most sophisticated institutional investors. They recognized that owning the factory, not just the products it makes, offers a differentiated return profile anchored by long-term recurring revenue and amplified by performance.

Why invest in GP stakes now?

Several dynamics are converging to make 2026 a compelling moment for GP stakes.

First, a liquidity challenge the asset class has faced is being solved. Historically, GP stakes were considered perpetual assets with indeterminate exit paths, which limited the investor universe and created uncertainty around distributions. That is changing.

Strip sales, where a GP stakes fund sells a pro-rata slice of its entire portfolio, have emerged as a powerful mechanism for generating liquidity and unlocking returns for existing investors.

Securitization structures are expanding the buyer base further, allowing insurance companies to participate via senior note tranches suited to their regulatory capital requirements while equity-oriented investors participate in the upside.

These innovations are still maturing, but they represent a structural shift in how GP stakes generate and return capital.

Second, LP-led secondary activity continues at record levels. When institutional investors rebalance portfolios or face liquidity needs, they often sell stakes in private funds at discounts to net asset value.

As the GP stake asset class grows and matures, the secondary market naturally expands, providing new supply that did not previously exist. This creates attractive entry points and grows the opportunity set for GP stakes investors.

Third, there is significant consolidation happening in the industry, as many of the larger players are acquiring other firms in order to have as robust an offering as they can.

They know that recent changes have enabled 401(k) investors to begin to allocate to private market assets and that companies that want to compete for those trillions of dollars will likely need to have a diversified set of vehicles in order to be approved by the plan sponsors.

There has been a drastic increase in the number of transactions in the past few years, and this creates a substantial opportunity to own firms that are performing well and could potentially be attractive targets.

All of these factors provide a very favorable backdrop for GP stake investors.

The GP stakes advantage

Owning private market GP stakes can create some material advantages to the publicly traded alternatives. The first is undoubtedly the vastly reduced volatility for the owner.

Public market investors can be infamously fickle, and their movements in and out of stocks can create wild swings that have little to do with the performance of the actual underlying business.

Private market GP stakes can provide quite a different experience. The management fees earned by these businesses are contractual, typically lasting seven to 10 years per fund. Carried interest represents asymmetric upside when funds perform well. And GP investments into their own funds generate returns that can compound quietly but significantly, all without public market volatility.

Private equity has also historically experienced less significant drawdowns and quicker recoveries than public markets during periods of stress. GP stakes, anchored by contractual fee streams and diversified across multiple managers and strategies, may magnify this resilience.

Transactions for private GP stakes normally occur at meaningfully different valuations than public markets. In many cases, these transactions can occur at a 40% to 60% discount to the public comparables, primarily owing to the liquidity premium for the businesses that can be bought and sold every day.

That creates a material advantage for those who are comfortable owning a stake in the private companies.

Further, private GP stakes typically provide a much higher cash flow stream to their investors. In most public alternatives, the dividend yields are notoriously low, by design.

Sometimes there is no dividend at all, and the majority of public companies distribute a yield that is below what a Treasury bill will provide.

On the other hand, it is very common in a private GP stake to receive consistent distributions, over a full market cycle, that average 6% to 12%, or even higher.

Access to GP stakes is broadening

For decades, alternative investments and GP stakes were the exclusive domain of sovereign wealth funds, large pensions and multibillion-dollar family offices. That is changing.

The allocation gap remains stark. Ultra-high-net-worth families and elite endowments and foundations often allocate 50% or more of their assets to alternatives, while traditional investors allocate just 3% to 5%.

GP stakes offer a path to close that gap, providing diversified exposure not just to private markets but to the economics of the managers who drive them.

New structures, including interval funds that offer periodic liquidity and simplified tax reporting, are making it possible for a broader set of investors to participate.

Retirement plans and individual investors working through advisers can now access strategies that were previously reserved for those writing nine-figure checks. The economics remain attractive; the access is simply widening.

But access alone is not enough. Not all GP stakes are created equal, and neither are the vehicles through which investors access them. The best structures offer diversification across dozens of managers, participation in strip sales and secondary transactions, and alignment between the investors and the manager.

Investors should prioritize both manager quality and vehicle design. Working with allocators who have genuine access to top-tier opportunities, and the structures to deliver them efficiently, is often the difference between strong outcomes and suboptimal ones.

GP stakes deserve consideration

As we head into 2026, GP stakes represent one of the most dynamic corners of private markets. The structural trends are favorable: Private markets continue to grow, managers want growth capital, and liquidity solutions are maturing.

The access story is improving. And the disconnect between public market sentiment and private business fundamentals creates opportunity for those who understand the difference.

For advisers and investors seeking differentiated, income-oriented exposure to the growth of private markets, GP stakes deserve serious consideration. The key is finding the right guide.

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