Limited Partners should resist pressuring VCs for early exits to lock in DPI. The best companies compound value at incredible rates, making it optimal to hold winners. Instead, LPs should manage portfolio duration and liquidity by building a balanced portfolio of early-stage, growth, and secondary fund investments.

The traditional IPO exit is being replaced by a perpetual secondary market for elite private companies. This new paradigm provides liquidity for investors and employees without the high costs and regulatory burdens of going public. This shift fundamentally alters the venture capital lifecycle, enabling longer private holding periods.

Sophisticated investors no longer use secondaries just to quickly build a private equity program. The strategy has matured into a core allocation, valued for offering faster deployment, better cash flow control, and consistent performance across market cycles.

In a world of commoditized capital, offering a full suite of solutions creates a competitive advantage. By providing fund investments, co-investments, secondary liquidity, and portfolio company debt, a firm becomes an indispensable strategic partner to PE sponsors, generating proprietary and superior deal flow.

To solve the critical illiquidity problem for individual investors, Goldman Sachs operates a proprietary, quarterly secondary market developed over 20 years. This platform allows its wealth clients to list and sell their alternative investment positions, transacting over a billion dollars in NAV annually and providing a crucial liquidity solution.

TA's compensation structure aligns partner incentives directly with investor returns. The primary way for partners to increase their ownership (carry) is by generating realized gains—i.e., returning capital to Limited Partners. This systemically prioritizes liquidity and successful exits over simply deploying capital or marking up portfolio value on paper.

Instead of viewing the flood of private wealth as competition for deals, savvy institutional investors can capitalize on it. Opportunities exist to seed new retail-focused vehicles to gain economics, buy GP stakes in managers entering the wealth channel, or use new evergreen funds as a source of secondary market liquidity.

In frothy markets with multi-billion dollar valuations, a key learned behavior from 2021 is for VCs to sell 10-20% of their stake during a large funding round. This provides early liquidity and distributions (DPI) to LPs, who are grateful for the cash back, and de-risks the fund's position.

After discovering that buyers of their portfolio companies were achieving 3x returns, TA shifted its strategy. Instead of selling 100%, they now often sell partial stakes. This provides liquidity to LPs and de-risks the investment while allowing TA to capture significant upside from the company's continued compounding growth.