GP consolidation has by turns delivered benefits and burdens to institutional investors in private market funds, depending on situation specifics. This has influenced both their long-term strategic positioning and activities at the transaction level.

The trend is often viewed as a signal of the industry’s maturity. Scaled asset managers offer stability, strong deal origination and value creation platforms, back office and fundraising efficiencies, one-stop strategy diversification, cross-strategy synergies, and professionalised succession plans.

It is also seen as a threat to GP-LP alignment as managers become fee-driven asset gatherers rather than returns generators. Juggling strategies can be seen as a lack of focus. Consolidation means reduced choice. Scale means reduced agility.

The most immediate response from LPs has been to weave measures intended to preserve alignment of interests into limited partnership agreements (LPA) and intensify due diligence. Scrutiny of funds is evolving in terms of getting comfortable around succession, spinout risk, and whether managing partners plan to monetise their firm by selling a GP stake or going public.

One private markets allocator for an insurance company claims to avoid backing GPs deemed likely to be acquired by a larger manager. The investor noted that, counterintuitively, a manager that is still 100% owned could be riskier in this sense because it is optimally positioned to be consolidated or listed.

Audrey The, a partner at Cambridge Associates, said consolidation has changed the way her firm looks at due diligence because the enlarged managers are more inclined to launch semi-liquid or evergreen funds to access retail and high net worth LPs.

“You have to really look through the documents to understand how the GP thinks about investing across these different structures. If I’m a traditional LP investing into a closed-ended fund that’s going into the same deals as the evergreen fund, I need to understand how decisions are made and where the lines are drawn between the strategies because there are different costs of capital,” she explained.

“That LP-GP alignment piece may be what’s driving institutions down to the middle and lower middle market, where we are seeing continued healthy interest from LPs.”

Irreversible trend

It comes with a sense that consolidation is an inevitable part of a long cycle. After decades of expansion, less competitive managers are being flushed out of the industry at a greater scale than ever before. GPs are now being run more like the businesses they acquire, using M&A as a tool to access new markets and acquire capabilities.

LPs speak of the trend with more stoicism than alarm. Anita Rana, a principal in the portfolio management group at Hamilton Lane, went as far as saying the concentration of capital into fewer, more diversified GPs would not materially impact LPs in a broad or structural way.

“We are seeing very large public asset managers that have really only driven their revenues through public markets trying to expand their footprint into private markets by buying a GP. That makes sense because it’s very difficult to build that organically,” Rana said.

“They may want to grow into private wealth, diversify their investor base, maybe grow more into evergreen. But I would question how quickly and effectively that is actually making a difference.”

The statistical evidence emerging around GP consolidation suggests that even if it’s not a seismic shift, the trend itself is structural and likely to give LPs more to think about for the foreseeable future.

A record 71 control acquisitions of GPs were announced globally in 2025, up 45% year-on-year, according to Campbell Lutyens. It marks a significant uptick compared to the prior four years, when annual transactions plateaued around 45, but it also reveals a gradual 10-year growth trajectory.

Campbell Lutyens tracks this space via its GP Capital Advisory business, which launched in late 2021 specifically to serve a growing workload around manager mergers, stake sales, and partnerships. Thomas Liaudet, who heads the unit, said 2026 is likely to be another active year for GP mergers because about half of deal flow is driven by succession issues.

“There’s no escape from that,” he said. “As the industry grows and scales and cements itself, you’re going to have more successions.”

Much of the conversation to date has revolved around the marquee transactions. Recent activity includes BlackRock completing its acquisition of HPS last July for USD 12bn after absorbing Global Infrastructure Partners (GIP) in a USD 12.5bn deal a year earlier.

The busiest names include CVC, TPG, Ares Management, and EQT. The latter, for example, announced a 100% acquisition of secondaries specialist Coller Capital for up to USD 3.7bn in January.

This has supported perceptions that consolidation is happening primarily at the top of the market and a relatively remote consideration for the bulk of the industry. Since acquirers are typically listed entities, they are often unable to communicate about transactions prior to public announcement, contributing to a sense among LPs that they are out of control.

Bradford Pilcher, a partner at GP stakes investor Bonaccord Capital Partners, pushes back on both points. He cites his firm’s data on GP M&A that found the median assets under management (AUM) of acquired managers in 2025 was USD 3.8bn. In 2024, the most active year yet, it was only USD 2.2bn.

“It’s not that LPs are in the passenger seat, with GPs getting bigger and LPs taking whatever they’re given. We’ve spent enough time with different sponsors, I can promise you, GPs don’t feel like they’re always in control,” Pilcher said.

“LPs’ agency is demonstrated in their overwhelming migration down-market. A lot of LPs – especially those with newer portfolios – value the sense of stability and level of service that comes from being with big firms. But if that comes at the expense of returns, LPs are moving on.”

Into the middle

Most of the 27 industry professionals interviewed for this story have observed increased LP focus on the middle market, notably among the largest institutions. While a desire for diversification into areas with greater potential for outsized returns is the key driver, getting away from the mega-sizing of global large-cap GPs is seen as a contributing factor.

Many LPs downplay the notion that increasing penetration of large institutional investors has reduced access to funds. However, it has become more difficult to maintain access to – and influence over – the best GPs, especially when robust demand prompts significant growth in fund size.

Rachael Lockyer, a portfolio manager at MLC Private Equity, observed that certain LPs may find their relevance is diminished. It’s a longstanding challenge endemic to the industry, but one that has intensified with consolidation. MLC sees its risk appetite and capability to back first-time funds as important differentiators versus other large institutions with less experience in the middle market.

“We’re backing US managers you might never have heard of, and a lot of other LPs are googling their names, coming in at Fund II or Fund III,” Lockyer said. “We fundamentally feel good about maintaining our positions and co-investment flow with those GPs because we helped them set up their businesses, so we have loyalty.”

At the same time, competitive dynamics at every level of the middle market appear to be stoking M&A activity. Managers that accept their historical playbooks are no longer up to scratch are considering their options. The proceeds of an initial GP stake sale might therefore be used to effectuate a specific capacity expansion, but if this doesn’t alleviate the pressure, they might ultimately give up control.

It can be a vicious circle. When GPs overcome shortcomings by joining larger platforms, it heaps pressure on their still-independent competitors to keep up.

“For middle-market GPs, it’s almost always about staying independent while accessing the benefits of a strategic partner,” said Christian Von Schimmelmann, who set up GP stakes investor Pact Capital Partners last year after a 24-year career at Goldman Sachs, where he co-led its GP stakes business Petershill.

“As the market evolves and they grow, they sometimes see the benefit of selling control. Probably 10%-20% of GP stakes deals have had that second step. But it’s usually not a stated goal upfront. And for us as a GP stakes investor, it’s not part of our underwriting.”

There is also some sense from the manager side that M&A is easier to execute when targeting relatively small, middle-market operators. Mathieu Chabran, co-founder of Tikehau Capital, said small GP bolt-ons account for about 10% of his firm’s roughly USD 62bn in AUM. This includes the acquisition of ACE Management, a USD 500m AUM aerospace and defence specialist, in 2020.

“I’m not saying we would never do something transformative, but it’s unlikely. Those deals work on paper, and they work for the bankers, but they are challenging – valuations, integration, culture,” Chabran said.

Specialist private equity strategies are a discrete segment in the consolidation wave but not as hotly pursued as private credit, real estate, and infrastructure. This is because PE programmes grow episodically rather than linearly, meaning acquisitions require higher conviction and greater patience for choppy economics.

“Private equity in and of itself is generally not considered to be a growth business,” said one global asset manager that has acquired several GPs. “This is likely a contributing factor for why GPs that are bigger in other private market asset classes don’t have a sense of urgency in adding private equity strategies.”

Anatomy of a deal

LP views on consolidation are otherwise largely shaped by the details of the GP acquisitions themselves. Top concerns include potential key person changeups, how investment decision-making and processes could change, strategy revamps, and the acquired GP’s level of autonomy.

Much of it boils down to comfort on alignment between the merging investment teams as well as between GP and LP. The sticking point among LPs is often a perception that larger, multi-strategy platforms are less focused on returns than accumulating assets and fees.

“Culture is the thing that can really trip up LPs. New senior management is going to put their hands on things. The way they force their culture onto the newly acquired target can be very different,” said Scott Roberts, a senior managing partner at LP consultancy Belvedere Direct Lending Advisors.

“There are examples where [the target manager] was sold this bill of goods and then they get inside this big corporate behemoth and realise, ‘We’re all competing for resources. We’re not sharing resources – we’re all fighting each other.’ That’s where the culture gets bad.”

Even when a positive outcome is roundly projected, it comes with a significant amount of stress for LPs in the acquired entity, raising questions with an existential tone. What is the purpose of the sale? Is this about a complementary add-on or empire building?

Manulife Investment Management has been through this several times. Standout examples include EQT combining with Baring Private Equity Asia in a USD 7.5bn deal in 2022, and at the other end of the size spectrum, Ares Management’s acquisition of Singapore-based Crescent Point Capital in 2023.

Declining to comment on specific transactions, Liam Coppinger, a senior managing director and head of Asia Pacific private equity at the firm, observed that the experience from the LP perspective hinges on the level of communication from GPs.

Transactions disclosed to LPs after public announcement cause the most surprise and alarm. This is satisfactorily mitigated when one-on-one calls with GP management and LP advisory committee (LPAC) meetings are immediately organised. But in some cases, no such outreach is forthcoming.

“Outlining the strategic rationale, what’s changing, and what’s not – that is extremely important, especially for existing investors. We don’t want a change in strategy, team, governance structure, or the economics going to the team we backed,” Coppinger said.

“We’ve seen good messaging on that from some groups, but we’ve also experienced situations where messaging was almost non-existent and we have no relationship with the consolidating GP. Ultimately, GPs must understand that they’re not just buying a business – they’re buying relationships.”

Best practices

Campbell Lutyens’ Liaudet noted that most GP mergers now have earn-out components that help the selling team align with the long-term success of the larger franchise while giving comfort to the acquiror that the incoming team will stay on board for the next fundraise.

Such arrangements clarify the importance of communication with LPs. If LPs feel marginalised and therefore decline to support the next vintage, it hampers the earn-out. Liaudet added that, to preserve alignment, 70%-80% of carried interest should remain with the acquired investment team while the remainder goes to the consolidating firm.

“We advise our clients a day or two before signing a binding agreement to reserve the whole day, get into the war room, get the whole list of LPs, starting with the biggest, most important LPAC LPs, down to every single LP, and have a call with them. That’s really best practice,” he said. “‘Sorry we couldn’t tell you but please call next week or let me know when you’re in town’ – that’s bad practice.”

Campbell Lutyens recommended this approach to infrastructure investor Actis when it was acquired by General Atlantic in 2024. Actis booked two days to reach out to 180 LPs. Chairman Torbjorn Caesar was on every call, according to Liaudet.

Mark Wade, a partner at CAZ Investments, said that when his firm’s portfolio GPs are acquired, they usually communicate before the transaction. This is seen as a reflection of CAZ’s presence on the LPAC and status as a meaningful LP. However, Wade acknowledges that GPs may be limited in their ability to reach out to non-LPAC investors.

“It’s not really practical for a GP to try to manage their business thinking around what does my smallest investor think about whether I should do this transaction. They could enter into a transaction thinking about that, but they are not going to ask for permission from everybody on the front-end,” he said.

“You cannot do that because somebody’s not going to agree with it. Someone is going to try to do something about it that frankly is not in the best interest of every other investor.”

Communication may be cold comfort as LPs navigate gradually unfolding post-merger issues. The ramifications of new compensation structures, for example, will only come to light with time. Likewise, political tensions within the enlarged team can emerge slowly.

“They [LPs] need to restart the due diligence process because this is effectively a new manager with some holdovers,” Belvedere’s Roberts said. “The DNA has now changed, and the manager is not what it was before.”

Han Ming Ho, an investment funds partner at Reed Smith who has advised multiple GP-GP transactions, highlighted the risk of post-merger talent loss. Motivation and incentives must be handled carefully with the acquired team. Carrots in the form of promotions and increased carry exposure may be required. Acquired investors must also be given visibility on their professional progression in the merged entity.

An even more nuanced post-merger issue is the eventual cross-selling of strategies by the acquiring GP to the acquired LP relationships.

This is often considered a synergistic aspect of GP mergers, with CVC’s acquisition of secondaries investor Glendower Capital in 2021 flagged as a prominent case in point. Glendower, historically backed by small institutions and family offices, received access to CVC’s heavyweight LP base for its sixth global fund. The vehicle has raised more than USD 8bn against a USD 7bn target as of February.

The concern is that the promise of an expanded fundraising pipeline can double as a sales pitch for unwanted exposures. Three sources suggested this is being done through coercion.

The insurance company private markets allocator, who has seen multiple portfolio GPs become consolidated, said cross-selling is especially problematic when acquired funds are access constrained.

“It’s not official marketing, but they imply that if you would like to avoid being cut back, you should commit to two or three less popular strategies from the acquiring GP. Otherwise, you will be cut back 70%-80%,” the allocator said. “That’s typical. We don’t like to be forced to be an investor in other, less attractive funds.”

Mapping the future

Feedback in this vein appears set to proliferate as consolidation continues. What’s less clear is the extent to which the evolving environment will result in meaningful changes to LP strategy or the shape of the GP universe.

Numerous industry participants have outlined scenarios where thousands of GPs are whittled down to fewer than 100, creating legions of zombies on one hand and a band of multi-strategy global names on the other. Matthew Phillips, a partner at PwC, envisages a barbell effect.

“Those in the middle are the most at risk because they clearly have neither the scale nor necessarily the nimbleness to operate at the smaller end of the market. If you’re a mid-tier player, you either have to scale up and become multi-strategy or go niche,” he said. “There’s a shaking out with GPs, and I don’t see that reversing in the short term.”

LPs remain watchful but generally circumspect. Ralph Keitel, CIO at development finance institution SIFEM, sees natural limits on consolidation in the nature of private equity as an ego-driven industry. He estimates that as many as two-thirds of the GP mergers he has witnessed in 25 years as an LP have failed due to personality clashes.

“We LPs can be our own worst enemies. If something works, we throw money at it until it becomes too big and people start running out of good deals and have to start doing bad deals, which they struggle to get out,” Keitel said.

“So, the graveyard of zombie funds is filling up, and the barbell thesis is a legitimate concern, but the middle market is still big with a healthy rejuvenation process. Strategies go in and out of fashion. Every industry goes through cycles.”

The consensus is that the private markets fund management industry is still growing and therefore open to new entrants. Indeed, to some degree, GP M&A fosters spinouts, even in a difficult fundraising environment.

At the same time, some benefits of scale, such as capabilities around raising capital from retail investors, are expected to trickle into the middle market, chipping away at the logic of consolidation. One need only look at the streamlining efforts of conglomerates in recent years to forecast what extensively diversified private markets managers may do next.

“I think we’re in a world now where the farther away that firms are from their core competency with brand extensions, the more likely they are to either retire those brand extensions or merge them into something that is close to the core competency,” Scott Voss, a managing director at HarbourVest, said.

“Now as the re-up decisions come for brand extensions that were raised and deployed during what was not a great time to be investing, the performance isn’t always there. In a lot of cases, the names that are being cut are the newest ones that have been added.”