GPs can leverage Ontra’s AI-powered technology platform to negotiate, execute, and manage LP transfer agreements efficiently. LP transfers are becoming more common, yet a routine transaction can take 4-6 weeks and cost LPs tens of thousands.
Ontra’s technology platform for private markets provides a more efficient way to handle the LP transfer workflow, from gathering KYC/AML information to negotiating the LP transfer agreement and updating the GP’s legal entity and obligation information.
A positive outlook on the LP-led secondaries market
The LP-led secondaries landscape improved in 2024, according to William Blair’s report, 2024 Record Totals for Secondaries Point to Positive 2025 Momentum. Toward the end of 2024, William Blair saw sellers shift from “slightly motivated” to almost “purely optimistic.” Improved pricing dynamics and available dry powder are two additional drivers behind 2025 optimism. Assuming the private markets will see more and larger LP-led secondaries, GPs and their outside counsel could benefit from a streamlined, tech-enabled LP transfer process.
Challenges associated with LP transfers
Manual processes
When an LP transfers all or part of its interest to a new or existing LP in a fund, the GP and its external counsel face numerous manual processes. LP transfer agreements are typically repetitive, low-risk agreements, yet the overall transaction requires an outsized amount of due diligence and back-and-forth communication with various stakeholders.
Cost
Rising legal expenses have made investor transfers newsworthy. Typical LP transfers cost between $5,000 and $15,000 with law firms. However, some transactions are racking up much higher bills, displeasing both the transferor and transferee LPs.
While the rare complex LP transfer would require hours of an experienced lawyer’s time, standard LP transfer agreements offer clear opportunities for both time and cost efficiency. GPs, LPs, and outside counsel tend to agree there’s room for improvement.
Investor relations
GPs’ investor relations teams are consistently working to build long-term relationships with investors. This requires ensuring smooth transfer processes, which can be tough with traditional manual and costly workflows. IR teams that fail to manage expectations can end up with displaced LPs.
Obligation compliance
Depending on the terms of the LP transfer agreement and potentially a new side letter, the GP might have new obligations to record and manage. Ontra has observed several side letter trends, including an increase in side letters for secondaries. Historically, a secondary buyer acquired an as-is interest and didn’t have the leverage to negotiate side letter provisions. With a growing secondaries market, LPs are taking on a more meaningful approach.
Additionally, GPs have to consider the timing of an LP transfer and how it might impact a fund’s quarterly or annual reporting to its investors.
Leverage Ontra’s technology platform for a smooth process
Step 1: Confirm LP information & fund requirements
When an LP reaches out to the GP’s legal or investor relations team regarding a transfer, the GP must first determine if the change is indeed an LP Transfer vs. another transaction or change. The GP can confirm the LP’s information in Atlas, Ontra’s modern entity management solution, and Insight, Ontra’s AI-powered obligation management solution.
The fund manager must abide by the LPA’s consent and notice requirements, which they can quickly refer to in Insight. Typically, LP transfers require the GP’s consent, and in some cases, other investors must receive notification or consent. GPs can surface the information through Insight’s filters or ask a question in AI Search.
Step 2: Accelerate contract completion
Outside counsel tends to do the heavy lifting during the due diligence and negotiation phase, which is also when the LPs can incur considerable costs. A more efficient option is to use Ontra’s Contract Automation solution with our global Legal Network or Accord, our AI-powered contract negotiation software, in-house.
Through Contract Automation, Ontra’s Legal Network members do all the prep work for the LP transfer, including:
- Assist in coordinating the KYC/AML and tax documentation collection.
- Populate the transfer questionnaire.
- Communicate with all stakeholders to ensure the transfer stays on the agreed-upon timeline.
- Oversee the markup, negotiation, and execution of the LP transfer agreement.
- Oversee the markup, negotiation, and execution of the new LP’s side letter.
Fund managers that use both Contract Automation and Accord can determine, based on internal bandwidth and the complexity of the transaction, whether to send an LP transfer to the Legal Network or handle it in-house.
Step 3: Digitize new agreements
After the stakeholders execute the LP transfer agreement, the fund manager must update its records. The GP can leverage Ontra’s AI-powered document digitization to upload new legal documents to Insight or Atlas.
Step 4: Automatically update legal entity information & obligations
Finally, GPs leveraging Insight, Atlas, or both will have their records automatically updated to reflect the transfer. With Ontra’s solutions, they won’t need to manually update legal entity information and investor obligations.
Efficient LP transfers in a robust secondaries environment
Ontra’s technology platform for private markets offers a solution to the increasingly common LP transfer process. By automating key steps, from LP data verification to contract negotiation and obligation management, GPs can improve efficiency, maintain strong investor relationships, and reduce costs for their investors. Ontra’s streamlined approach to investor transfers is crucial for navigating the expanding LP-led secondaries market.
