Show me the exit

Series: What LPs are looking for in 2025

In 2025, liquidity is the undeniably loud conversation. With distributions lagging and traditional exit routes tightening, LPs are more focused than ever on when they’ll see capital returned. The broader economic backdrop – including tariff surprises, geopolitical uncertainty and a cautious IPO market – has only added more urgency to this question.

The liquidity crunch is real

Recent Bain data shows 2018 vintage funds are underperforming historical DPI benchmarks (0.6x vs. 0.8x). That might sound like a small gap, but in this environment, it's massive. When capital takes longer to recycle, it delays LPs’ ability to redeploy, impacts internal planning and strains relationships across portfolio and fund cycles. For LPs under pressure themselves to meet liquidity targets, this lag becomes a material risk.

Why DPI now leads the conversation

According to Moonfare, 42% of LPs say slower distributions are one of the main reasons they’re holding back from making new commitments. That’s backed up by another striking stat: 22.4% now say DPI (Distributed to Paid-In Capital) is the #1 success metric they track – not MOIC or IRR. In a climate where exit markets are slow and valuations are compressed, realized returns matter more than ever.

LPs want to see capital returned. Bain research shows 63% now prefer full exits, even at lower valuations, over partial sales or GP-led continuation vehicles. The preference shift is not just about liquidity – it’s a clear signal that LPs are prioritizing clarity and accountability over financial creativity.

The new exit narrative GPs need

Fund managers must reframe how they talk about exits. Vague references to IPO potential or general exit talk won’t cut it anymore. LPs want specific, credible plans:

• What is your typical exit timeline?
• Who are the actual buyer groups for your portfolio companies?
• What are you doing differently to speed up the path to liquidity?
• Can secondaries, NAV-based financing or fund restructurings play a role?

Additionally, GPs should articulate their role in managing around exit uncertainty. Are you holding assets longer due to market conditions? How are you preserving value and positioning for eventual monetization? This is about showing control.

How GPs should proceed

• Make DPI a central part of your pitch. Don’t just focus on projected returns, but show how you’ve distributed in the past and when LPs can expect to see cash back.
• Detail your exit strategy. Include timing, target buyers, and whether secondaries or NAV facilities are in play.
• Be transparent about past liquidity events. Have a real conversation about timing, delays and market dynamics.
• Address the macro context. Talk about how your strategy is evolving in light of slow IPO markets or geopolitical headwinds.

Takeaway

Liquidity is no longer a backend concern, it’s a core decision driver. Fundraising in 2025 means proving – not just projecting – how and when LPs will get paid. DPI has become the new north star, and GPs who embed it into their strategy and storytelling will be the ones who stand out.