The Coming Wave of Private Fund Restructurings

Private fund restructurings are no longer a niche topic reserved for distressed managers. They are becoming a defining feature of the current investment environment, and Family Offices are often the last to know that a change is coming. As distributions slow and liquidity tightens across private markets, more general partners are turning to GP led secondary processes, NAV facilities, and forced recapitalizations to keep funds moving. These tools are not inherently negative. In many cases they help preserve value. But for long term capital partners like Family Offices, they can also create difficult decisions, shifting incentives, and the potential for misalignment if not handled carefully.

Understanding what is coming provides a meaningful advantage. Family Offices that prepare early can protect themselves, negotiate better outcomes, and avoid making rushed decisions when a manager suddenly presents a restructuring proposal. The goal is not to become more skeptical of private managers. The goal is to become more informed and more strategic.

Why Restructurings Are Accelerating

Over the past decade, private equity and private credit funds have grown rapidly. Many managers launched new strategies, expanded sector focus, and built portfolios that were expected to provide strong and steady returns. That worked well during periods of easy liquidity and rising valuations. Today the economic backdrop looks very different. Exit markets have slowed. Buyers are more cautious. Financing costs remain elevated. Valuations are no longer expanding at the same pace.

In this environment, funds that projected a clear timeline for distributions are now facing delays. Assets are being held longer than expected. Some are carrying valuations that have not been fully tested in the market. Managers under pressure to deliver liquidity or continue supporting portfolio companies need new tools. This is why GP led secondaries, continuation vehicles, and fund level loans are becoming more common.

The challenge is that many of these structures shift risk and can change the relationship between the manager and the limited partners. For Family Offices that value clarity and long term alignment, it is essential to understand how each tool works and what questions should be asked.

GP Led Secondaries and Continuation Vehicles

A GP led secondary process allows a manager to move specific assets from an existing fund into a new vehicle. Existing investors are given the choice to sell their interest or roll into the new structure. On the surface, this provides optionality. In practice, it can create tension. Limited partners are being asked to make a decision based on information that is largely controlled by the manager. Pricing is often determined by a small group of secondary buyers who may have different return expectations than the original investors.

Family Offices should approach these proposals with calm analysis. The key questions include: How was the valuation determined? Who is the lead secondary buyer and what process was run to identify them? Is the GP receiving new economics that differ from the original agreement? What incentives or conflicts may exist in the structure?

Rolling into a continuation vehicle can be a smart choice when the asset is strong and still has room to grow. Selling can be appropriate if the price is fair and liquidity is needed. The important part is not to make the decision without fully understanding the alternatives.

NAV Facilities and Fund Level Leverage

NAV facilities are loans taken at the fund level, secured by the value of the underlying portfolio. They can be attractive because they provide quick liquidity without forcing asset sales. They can also help support portfolio companies that are temporarily stressed.

However, they add leverage to the entire fund. This means the risk profile for every limited partner changes, sometimes significantly. Family Offices should ask managers for clear details about how much leverage is being added, what covenants exist, how interest will be serviced, and how the facility affects distributions.

NAV loans are not automatically negative. They can stabilize a fund at the right moment. The concern arises when they are used as a substitute for difficult decisions or when they mask deeper issues in the portfolio.

Forced Recapitalizations and Capital Calls

Some managers are taking a more direct approach by asking investors for additional capital to support struggling companies or to restructure the fund. These situations require careful evaluation. A capital call to preserve a healthy asset may be justified. A call that is meant to plug holes or extend a fund that is unlikely to recover value is a different story.

Family Offices should not feel pressure to automatically support every recapitalization. It is reasonable to ask what alternatives were explored, whether other investors are participating, and what the manager is contributing.

What Family Offices Should Be Doing Now

Preparation is more effective than reaction. Family Offices can take several steps to position themselves well.

First, review current fund commitments and identify managers that may face pressure. Indicators include extended holding periods, declining distributions, concentrated portfolios, or valuation marks that have not been updated meaningfully.

Second, establish an internal framework for evaluating restructuring proposals. Having a consistent process helps eliminate emotional decision making.

Third, strengthen relationships with managers. Open communication often leads to better transparency before any formal proposal is made.

Finally, Family Offices should consider building relationships with secondary advisors or consultants who can help evaluate pricing and structure.

The wave of private fund restructurings is already emerging. Acting early and approaching each situation with clarity and discipline allows Family Offices to protect capital, preserve relationships, and stay ahead of the next shift in private markets.