GP Stakes Industry Matures Into Track Record Phase

What's Happening: Robert Hamilton Kelly, Global Co-Head of Petershill strategies at Goldman Sachs, discusses in PEI how the GP stakes industry has evolved to a point where investors can now evaluate actual performance data instead of projections.

Why It Matters:

• Dual benefit - GP stakes investing uniquely provides both income and capital appreciation, unlike most private market strategies that offer only one

• Validation - The industry now has nearly two decades of track records, giving investors concrete proof of performance through multiple cycles

• Market expansion - The strategy is gaining traction with public markets and wealth clients beyond traditional institutional investors

The Key Moves:

• Exit innovation - The market is developing multiple liquidity sources including individual sales, strip sales, IPOs, and a growing secondaries market

• Strategic value - Leading firms provide capital at "critical inflection points" in a GP's evolution while offering ongoing strategic support

• Mid-market focus - Established players like Petershill are targeting the mid-market space, avoiding both the highly competitive large-cap segment and riskier early-stage firms

By The Numbers:

• Since 2007 - Petershill has been investing in GP stakes, giving them extensive experience across market cycles

• 3 billion+ - Goldman Sachs has data points across thousands of funds spanning 30+ years to inform their underwriting

• Multiple exits - The industry has demonstrated successful realizations at strong valuations relative to holding values over the past 12 months

Key Insights:

• No yield curve - Like secondaries, GP stakes produce income from day one, making them attractive to wealth investors seeking immediate returns

• Targeted due diligence - LPs should focus on actual cashflows generated over time rather than accepting portfolio valuations at face value

• Diversification value - The strategy can complement traditional private market allocations by providing both income and growth exposure

Key Quotes:

• Proven strategy - "Prospective investors are looking at data and not projections, which is clearly very helpful when explaining what this strategy has to offer"

• LP due diligence - "This industry has now existed for long enough that they should be focusing on the proof behind the promises and not simply on projections"

• Liquidity evolution - "There is a flood of liquidity coming, and like all mighty rivers, that liquidity is not just coming from one source"

The Wrap: The GP stakes industry has matured from a speculative investment thesis to a proven strategy with demonstrable performance data. As the market continues to expand toward public markets and wealth clients, investors now have the tools to evaluate track records rather than relying on projections, marking a significant milestone in the strategy's evolution.