DPI in private equity: what LPs now ask GPs about distributions

Limited partners (LPs) are asking one question more than any other: how much cash have you returned? The metric behind it is DPI, distributions to paid-in capital, which divides cash returned to investors by cash they have contributed. Unlike internal rate of return (IRR) or total value to paid-in capital, DPI cannot be changed by a valuation committee. It is the one measure of fund performance an investor can bank, spend or reinvest, and for the past four years it has been in short supply.

Bain & Company's Global Private Equity Report 2026 shows the scale. Distributions as a share of net asset value stayed flat at 14% in 2025, a level not seen since 2008–09, and have lagged historical averages for four straight years. MSCI, analysing private-capital cash flows, describes distributions as subdued, extending a slowdown that began after the 2021 exit boom. A fund can post a respectable IRR on paper and still be a net consumer of its investors' liquidity.

The pressure on LPs is practical. Bain cites a Private Equity International survey in which 53% of LPs said they are limited in making new commitments, 15 percentage points more than at year-end 2024. Pension funds, endowments, insurers and sovereign investors made large commitments in the record 2021–22 fundraising boom, and those commitments are still being called while distributions arrive slowly. An LP that cannot fund a new commitment cannot back a new fund, however good the track record.

It helps to separate three audiences who ask about distributions. Investment committees want to know whether the fund fits the pacing of their programme. Operations and finance teams at the LP want predictable cash flows for capital calls and reinvestment. Boards and trustees want a plain-language account of why money is slow to return. An investor relations director should be able to answer all three without changing the underlying facts, only the level of detail. A single set of numbers, explained three ways, is more credible than three sets.

For investor relations teams the implication is that the questions in annual meetings and due diligence questionnaires have shifted from what the portfolio is worth to when it pays. Teams that still lead with marks and multiples will be answering a question LPs have stopped asking. What to do: rebuild the quarterly narrative around cash. Lead with realised proceeds, distributions to date and the next twelve months of expected proceeds with the evidence for them, then move to valuation.

Cash is scarce because of a backlog. Bain estimates the stock of unrealised buyout assets at roughly 32,000 companies worth $3.8 trillion. Holding periods at exit are hovering around seven years, up from an average of five to six years from 2010 to 2021, and almost 40% of companies are held for more than five years, up from 29% in 2019. Every extra year of holding is a year in which DPI cannot move.

The effect compounds across vintages. Bain's analysis finds that GPs have underdelivered against historical distribution performance in every vintage from 2017 to 2021. That matters because LPs read recent vintages as the best guide to a manager's next fund. A single strong older fund will not offset three recent ones that have not yet paid out, and LPs will say so when they compare DPI against vintage peers.

The same pattern appears in the United States. FTI Consulting, using PitchBook data, counts about 1,400 investments from 2018–2022 deals still held beyond the retention rates of earlier cohorts, nearly 11% of a 13,500-company inventory. The longer-hold problem also means that LPs are underwriting the next fund while the last two have not paid out. They are on the hook for commitments made in the record 2021–22 fundraising boom, and their patience is a finite resource.

Investor relations teams should also expect the backlog to shape how LPs read the next fund's pacing. If a manager's earlier funds are still holding most of their companies, the LP will assume the new fund competes for the same management attention and the same exit windows. Clarifying how the team is organised to manage both harvesting and investing, and which partners carry each responsibility, answers a question that is rarely asked directly but frequently influences the decision.

There is a further consequence of long holds that LPs seldom say aloud. Older assets are often the ones that did not exit when conditions were favourable, which raises the question of whether the delay reflects market timing or asset quality. GPs should expect that question and answer it directly, asset by asset, with the value-creation plan, the capital still needed and the specific trigger for sale. Vague references to waiting for a better market will be read as an admission that no plan exists.

What to do: publish, for every active fund, an age-adjusted DPI view against vintage peers, with the portfolio split by holding period. Show how many companies are past year five, why each remains held and what has to happen for it to exit. Candour about age is better received than a surprise at the annual meeting, and it gives LPs a reason to trust the dates you give them next.

Bain records global buyout-backed exit value up 47% to $717 billion in 2025, yet the number of exits fell 2% to 1,570. Value recovered faster than volume, which suggests that large transactions did much of the work. For a GP with mid-sized companies, a strong headline does not guarantee that its own portfolio will see proceeds, and LPs know the difference between an industry total and a fund-level result.

The channels differ sharply. Bain reports strategic-buyer exit value growing 66% in 2025, GP- and LP-led vehicles 41%, IPOs 36% from a very small base, and sponsor-to-sponsor sales 21%. Strategic buyers are therefore doing most of the work, and a GP's exit calendar should say which companies have credible strategic interest, not only which are ready. Readiness without a buyer is a hope, not a plan.

Regional data shows the same unevenness. EY reports 19 private equity exits in Australia in the first half of 2026 against 25 a year earlier, while Bain records Asia-Pacific exit value up 24% in 2025. The same market can look healthy in value and weak in volume. Investor relations teams working across regions should report both measures, and should explain which one drives the fund in question.

Another reading of the channel data is that exit routes are not interchangeable. A strategic sale usually delivers cash at completion and removes the asset entirely. A listing often leaves the sponsor holding shares subject to lock-ups, so DPI rises only as stock is sold. A sponsor-to-sponsor sale depends on the next buyer's financing. A continuation vehicle returns cash to some LPs while others roll. Describing each route in these terms helps LPs translate an exit announcement into a distribution forecast.

What to do: classify each portfolio company by its most likely exit route and give each a probability range rather than a single date. Strategic sale, sponsor sale, listing, continuation vehicle, partial sale or dividend recapitalisation each carry different timelines, different buyers and different disclosure obligations to LPs. A calendar that shows a mix of routes and honest ranges earns more trust than one that shows twelve trade sales in twelve months.

ILPA's 2025–2026 sentiment survey shows how LP expectations have moved. While 61% say their five-year net return assumptions for private equity are unchanged, 33% have decreased them and only 6% have increased them. The average expected five-year net return was 15.7%. LPs still expect private equity to outperform, but fewer of them believe the old assumptions, and they will test every GP claim against the lower number.

Behaviour is shifting with expectations. ILPA reports that 47% of LPs expect to decrease exposure to large-cap managers over the next 12 months, and only 21% selected continuation vehicles as one of their preferred paths to liquidity. McKinsey reports that around 70% of surveyed global LPs plan to maintain or increase private equity holdings in 2026. LPs are not leaving the asset class; they are becoming more selective about whom they back, and why.

Bain adds that most LPs lean towards holding out for better returns rather than near-term liquidity, provided GPs can deliver. That condition is the important one. Patience is a loan against the manager's credibility, and each missed date draws it down. A GP that says an exit will happen in two quarters and then misses twice has used more of the loan than one that said 'between four and eight quarters' and delivered in six.

Finally, expectations differ by region and by investor type, and a global GP should not assume one message fits all. A sovereign or institutional investor in the Gulf, a UK local government pension scheme and a US endowment each manage a different liquidity position and a different governance process. Learn their reporting calendars, their committee dates and their preferred metrics, and shape the materials accordingly. The facts should not change; the order in which they are presented should.

The tone of the conversation matters as much as the content. LPs report greater negotiating leverage with managers than a year ago, according to ILPA, and they use it to ask for transparency on fees, reporting and alignment. A GP that treats the distribution question as a negotiation to be managed will lose ground to one that treats it as an information request to be answered well. Investor relations teams can set the tone by volunteering the data LPs will otherwise have to ask for.

What to do: prepare for LP conversations at three levels: fund-level DPI against vintage peers, portfolio-level exit calendar, and relationship-level liquidity options. Equip partners with a one-page answer to the question 'what do you need from us to hold on?' Where a GP can offer an LP a genuine choice, such as a partial sale or a secondary route, state the terms and the process openly rather than waiting to be asked.

Buyout fundraising fell 16% to $395 billion in 2025, and Bain describes closing a fund as a slow and difficult slog. PitchBook reports that since 2024, 77% of capital raised has flowed to funds over $1 billion, compared with 63.6% in 2014 to 2016. Capital is concentrating in managers perceived as safe, which makes the bar higher for everyone else.

Bain's history of the previous cycle is a warning. In normal periods roughly 15% of fund series fail to reraise. After the global financial crisis the rate rose to around 20%. Today around 70% of the fund series expected to reraise have done so, which leaves about 30% that have not. Bain adds that after the crisis the failure rate was much higher for funds in the third and fourth quartiles for DPI. The lesson is that LP patience ran out first on managers who had not returned cash.

For an investor relations director, this means the fundraising pitch is decided long before the roadshow. If prior funds have returned cash in line with peers, the story can be about the future. If they have not, the story has to be about the plan to return it. Either way the evidence is the same: realised proceeds, the pipeline of exits and the credibility of the dates. Marks alone no longer carry a first-time conversation with an LP committee.

The pressure is not only on large managers. PitchBook's data on concentration implies that smaller and newer managers face the steepest climb, since LPs seeking safety favour established names. Emerging managers cannot compete on scale, so they must compete on transparency and proof. A first or second fund that has returned a meaningful share of paid-in capital early, and can show how, has a tangible advantage over one that relies on potential. Early partial realisations matter disproportionately for such managers.

What to do: run a pre-marketing audit. Ask what an LP's investment committee will see in your last three funds' DPI against benchmark, and prepare the explanation. Identify the three LPs most likely to ask hard questions and brief them early. Where a next fund depends on a prior fund returning capital, build the schedule of expected proceeds for that fund as a standalone document, reviewed by finance and the deal team before it leaves the building.

Continuation vehicles and other GP- and LP-led transactions are among the fastest-growing routes to liquidity, with transaction value up 41% in 2025 according to Bain, but they still account for less than 10% of private equity exit value. Bain's GP survey found that more than half of respondents cited generating liquidity to cash out LPs as a primary reason for launching one. The market exists because the need exists.

LPs are not uniformly enthusiastic. ILPA found only 21% of LPs selected continuation vehicles as one of their preferred paths to liquidity. The concerns LPs typically raise are conflicts of interest, pricing and the quality of the choice offered between selling and rolling. GPs should not assume that the existence of a market makes every transaction acceptable. Bain reports that LPs will usually tolerate only one such transaction a year at most from a given GP.

Our view is that a continuation vehicle is a legitimate tool when it is a considered answer to a specific asset's needs, with independent pricing, a genuine option to sell for cash and a clear explanation to the LP advisory committee. It is a poor tool when it is the default response to a calendar problem. A manager who uses one transaction to solve one asset's problem keeps its credibility; a manager who uses it to defer a fund's problem spends it.

A final consideration is timing within a fund's life. Continuation vehicles and partial sales used in the harvest period, once the investment case for an asset is substantially delivered, look different from those used to avoid a fund's end date. LPs notice the difference. When a transaction is proposed, a short note setting out the asset's remaining upside, the alternatives considered and the reason this route was chosen helps the advisory committee judge the proposal on its merits rather than on its optics.

What to do: document a policy before you need one. State when you would consider a continuation vehicle, how pricing is tested, what choices LPs have and how the advisory committee is engaged. Agree the process steps with legal and valuation advisers in advance. Treat partial sales, dividend recapitalisations and net asset value financings with the same discipline: say what each is for, what it costs and how LPs benefit.

Traditionally, investor relations reported performance prepared by finance and the deal team. In a liquidity-constrained market, the function becomes the owner of an evidence set that links deal team views to LP decisions: the exit calendar, the DPI bridge, the LP question log and the commitment capacity of key investors. This requires access to deal team views on timing and a mandate to challenge them. Without that mandate, IR carries the message without owning the substance.

A DPI bridge is a simple but powerful document. It starts from current DPI and shows, quarter by quarter, the realised and expected proceeds from each named asset, with probability weighting and the assumptions behind it. It ends with projected DPI at the close of the next four quarters under three cases: base, slower and faster. It tells an LP what the manager believes and how sensitive that belief is to the market.

An LP question log is the companion. Record every question received on distributions, by investor and by fund. After two quarters, patterns emerge by investor type, and answers can be prepared in advance. The log reduces ad hoc requests, helps partners keep messages consistent and signals command of the portfolio. It also gives the deal team early notice of the issues LPs are about to raise at the annual meeting.

Governance finishes the picture. A pack of this kind is only as good as the controls around it. Dates should be changed through a documented process, with the deal team's reason recorded and the chief financial officer's sign-off. The investor relations director should be able to show an LP the history of a date, not just its current value. That audit trail is what turns an exit calendar from a marketing document into a management tool, and it is what separates credible managers from the rest.

What to do: in the next quarter, build the DPI bridge for each fund and review it with the investment committee. Create the LP question log. Agree a single vocabulary for realised, partially realised and unrealised value. Ensure compliance reviews every LP communication, including any that fall under financial promotion rules; Karter McKinley supports the process and materials and does not provide investment advice or regulated marketing.

Karter McKinley supports capital-raising processes, including the evidence packs investor relations teams use with limited partners. We help build the exit calendar, DPI bridge and LP question log, working alongside FCA-authorised firms where regulated activity is involved. This is information, not investment advice.