Building trust: key strategies for resilient GP-LP partnerships in 2025

The private equity landscape is evolving rapidly, and the strength of GP-LP relationships has never been more critical. As market dynamics shift and regulatory frameworks adapt, building trust through transparency, communication, and alignment has become the cornerstone of successful partnerships. Here's what industry leaders need to know about fostering resilient relationships in 2025.

The current fundraising environment: navigating liquidity challenges

The fundraising landscape in 2025 presents distinct challenges across different asset classes. Private credit continues to perform at all-time highs with robust deal flow, while private equity faces a significant slowdown in exits and true distributions. This divergence is reshaping how LPs approach their allocation strategies.

The exit slowdown has created a direct impact on LP liquidity. When distributions slow down, whether from actual company sales or traditional exit mechanisms, LPs face constraints on their ability to make new commitments. This reality is forcing institutional investors to become more selective in two key areas:

• The size of individual commitments they make
• The number of GP relationships they maintain

LPs are writing smaller checks to preserve capital for existing relationships and maintain flexibility for future opportunities. Rather than spreading capital across numerous managers, LPs are consolidating relationships with proven partners who demonstrate consistent performance and strong communication.

True distributions, meaning actual proceeds from company sales rather than continuation funds or NAV-based facilities, remain the lifeblood of the reinvestment cycle. Without this capital returning to LPs, the entire fundraising ecosystem experiences friction.

Investment structure preferences: co-investments and secondaries take center stage

LPs are increasingly strategic about the structures they pursue. Co-investment opportunities remain a top priority for institutions with the capability to execute them. In fact, many LP commitments to primary funds are made specifically to secure access to co-investment opportunities, which offer the potential for enhanced returns without additional management fees.

Secondaries have undergone a fundamental shift in how LPs view them. What was once an occasional portfolio management tool has become part of the annual strategic planning process. LPs now routinely consider secondaries as a way to trim portfolios, rebalance exposures, and manage liquidity needs. This represents a complete transformation from just a few years ago when many LPs had considered but not yet executed their first secondary transaction.

Recent industry data confirms these preferences:

• 37% of LPs prioritize co-investments
• 24% focus on secondaries
• 11% consider continuation funds

From a sector perspective, technology and healthcare continue to dominate LP interest, reflecting both growth potential and the maturity of these investment categories.

The technology revolution: data standardization and portfolio intelligence

Technology has fundamentally transformed how LPs manage their portfolios and evaluate opportunities. The shift from building internal solutions to buying best-in-class technology platforms has accelerated dramatically. This transition makes strategic sense when you consider that specialized technology providers employ significantly more development resources than most LP organizations could justify internally.

The buy vs. build decision

The preference for purchasing technology solutions over building them internally stems from several factors:

• Enhanced capabilities: modern platforms offer sophisticated analytics and reporting that would require substantial internal resources to replicate.
• Cost efficiency: as more providers enter the market, competition has driven up quality while driving down costs.
• Continuous innovation: software-as-a-service models ensure LPs benefit from ongoing enhancements without bearing the full cost of development.
• Specialization: technology providers focus exclusively on solving industry-specific challenges, bringing deep expertise to their solutions.

This same logic applies to operational functions. Third-party fund administrators and managed service providers increasingly handle tasks like data aggregation and document management, freeing LP teams to focus on higher-value activities like investment analysis and relationship management.

Data aggregation: the critical challenge

An overwhelming 95% of investors surveyed identified aggregation tools for portfolio data as helpful for making better investment decisions. The challenge of collecting, standardizing, and analyzing data across multiple fund managers remains time-consuming and error-prone when done manually.

The demand for data has evolved beyond basic performance metrics. LPs now require:

• Fee and expense transparency: especially critical as more costs get passed through to the partnership rather than covered by management fees.
• Subscription line impact analysis: understanding performance both with and without the effects of credit facilities.
• Portfolio company-level data: granular information that enables sector exposure analysis, geographic concentration monitoring, and risk assessment across the entire portfolio.
• Cash flow forecasting: better visibility into upcoming capital calls, particularly given the prevalence of subscription lines.

The ultimate goal is data at LPs' fingertips, enabling proactive portfolio management rather than reactive decision-making. When LPs can anticipate capital calls with greater accuracy, they can manage their public equity portfolios more efficiently, avoiding forced sales to meet unexpected funding needs.

Industry standardization: the ILPA templates and beyond

The ILPA DDQ: an enduring standard

The ILPA standardized due diligence questionnaire (DDQ), last updated in 2021, remains one of the most downloaded resources in the industry. Its design philosophy recognizes that while 80% of LP questions are common across institutions, 20% will always reflect unique requirements based on organizational needs, jurisdictional considerations, and specific legal requirements.

This balance between standardization and customization benefits both sides of the partnership. LPs receive comprehensive information in a familiar format, while GPs can maintain consistent response sets rather than addressing endless ad hoc requests.

New reporting templates: driving transparency forward

In January 2025, ILPA released updated reporting standards developed through extensive industry collaboration:

• The ILPA reporting template: captures fee and expense information on a quarterly basis in a standardized format.
• The ILPA performance template: provides inception-to-date performance metrics quarterly, including critically important with-and-without subscription line performance calculations.

These templates emerged from working groups comprising roughly equal representation from LPs, GPs, and service providers, ensuring they reflect real-world needs and operational feasibility. Implementation timelines are staggered, with the reporting template first delivered after 1Q 2026 and the performance template after 1Q 2027.

The path forward on standardization

While the SEC's private fund adviser rule was vacated in June 2024, ILPA remained committed to advancing industry standards through bottom-up collaboration rather than top-down regulation. The templates were adjusted following the rule's vacation to focus on industry-driven solutions rather than regulatory compliance.

The vision for the future is ambitious: moving from systems that export data to PDFs or spreadsheets, which then require manual entry or scraping into LP systems, toward direct system-to-system data feeds. This would mirror the efficiency of mutual fund data feeds, where information flows seamlessly between platforms.

Achieving this vision requires continued commitment to standardization across all industry participants. Only through common data structures and formats can the industry unlock the full potential of modern technology.

Regulatory landscape: a tale of two hemispheres

The U.S. outlook

Following the Fifth Circuit Court of Appeals ruling and the vacation of certain SEC rules, the U.S. regulatory environment appears poised for a period of reduced rulemaking activity. The emphasis is shifting from top-down regulatory requirements to industry-driven standards and best practices.

This doesn't diminish the importance of governance, transparency, and alignment of interest. Rather, it places greater responsibility on industry participants to collaborate on voluntary standards that serve the sophisticated institutional investors on both sides of GP-LP partnerships.

The global perspective

Outside the United States, regulatory momentum continues to build, particularly around ESG, sustainability, climate change, and DEI data and reporting. LPs and GPs operating in international markets must navigate increasing requirements from regulators in Canada, the UK, the broader EU, and other jurisdictions.

This creates a complex environment where GPs must understand not just U.S. regulatory expectations but also the requirements of their global LP base. What may be deprioritized in U.S. policy discussions remains critically important to international investors and regulators.

Building resilient partnerships: best practices for long-term success

The partnership mindset

The acronyms LP and GP contain a crucial word: partner. The most successful relationships recognize that private equity investments represent true partnerships, often spanning 12 to 15 years or longer when considering re-up opportunities across multiple fund generations.

Treating the GP-LP relationship as a genuine partnership requires:

• Open communication: regular dialogue beyond quarterly reporting, especially when market conditions create uncertainty or when new tools and structures are being considered.
• LPAC engagement: leveraging the limited partner advisory committee not just for required approvals but for meaningful consultation on strategic decisions.
• Proactive transparency: sharing information before LPs need to ask for it, particularly regarding new facilities, continuation funds, or other structural decisions that impact the partnership.
• Mutual respect: recognizing that many LPs have fiduciary responsibilities to their own stakeholders, just as GPs have fiduciary duties to the fund.

What LPs prioritize in manager selection

When evaluating fund managers, LPs look beyond historical returns to assess the quality of the partnership they're entering. Key characteristics include:

• Communication quality and frequency: how well the GP keeps LPs informed, not just through formal reporting but through ongoing dialogue.
• Transparency standards: the level of detail provided about fees, expenses, portfolio company performance, and the use of various financial tools.
• Alignment demonstration: how the GP shows that their interests align with LP interests, particularly regarding fee structures and investment decisions.
• Adaptability: how the GP responds to changing market conditions and LP needs.

The challenge for LPs is that priorities evolve as new tools and structures emerge in the market. NAV-based facilities, for example, weren't a major concern five years ago but have become a significant focus area. LPs increasingly expect to learn about such facilities through proactive GP communication, not through detailed review of financial statements after the fact.

Navigating difficult conversations

The current environment requires LPs to have challenging discussions with GPs about position sizing, re-up decisions, and portfolio trimming. These conversations are never easy, but they're essential for maintaining healthy partnerships.

GPs can facilitate these discussions by:

• Understanding the liquidity pressures LPs face
• Being flexible where possible on commitment sizes and timing
• Maintaining perspective that a smaller commitment or a passed re-up opportunity isn't necessarily a reflection on GP performance but rather LP portfolio constraints

The 2025 outlook: cautious optimism

Reasons for hope

Market participants are eager for increased deal flow, and there's growing recognition across the GP community that exits need to accelerate for the health of the entire ecosystem. The substantial dry powder raised in the vintage years of 2020, 2021, and 2022 represents significant capital waiting to be deployed.

Some macroeconomic indicators suggest conditions may be stabilizing, which historically supports increased M&A activity and exit opportunities.

Reasons for caution

Deal flow activity in the first two months of 2025 was toward the lower end of the historical spectrum. While LPs surveyed indicate they anticipate 2025 will be better than 2024 and 2023, similar sentiment in previous years didn't always translate to reality.

The pattern of delayed expectations, where improvement is perpetually anticipated "by the end of this year or next year," has persisted for several years now. At some point, expectations must align with execution.

The performance imperative

LPs recognize the challenges facing GPs in the current environment, but they also expect their managers to deliver strong performance in both good markets and bad. Management fees and carried interest compensate GPs for navigating difficult conditions, not just capitalizing on favorable ones.

The message from the LP community is clear: 2025 needs to show tangible improvement in exit activity and distributions. The industry's long-term health depends on it.

Conclusion: trust through action

Building resilient GP-LP partnerships in 2025 requires more than good intentions. It demands concrete action across multiple dimensions:

• Embrace standardization: adopt industry templates and standards that improve transparency and reduce operational friction.
• Invest in technology: leverage modern platforms that enable better data aggregation, analysis, and decision-making.
• Prioritize communication: treat LPs as true partners through proactive, transparent dialogue.
• Demonstrate alignment: show through actions, not just words, that GP and LP interests are genuinely aligned.
• Deliver results: execute on the core mandate of generating strong returns while managing risk appropriately.

The partnerships that thrive in the coming years will be those built on a foundation of trust, enabled by technology, supported by industry standards, and sustained through genuine collaboration. The tools and frameworks exist. The question is whether market participants will fully embrace them to create the transparent, efficient, and mutually beneficial relationships that define best-in-class private equity.