Unlocking PE Firm Growth Through GP Stakes

What does it take for a private equity firm to truly stand out?

In this episode, Shiv sits down with Bradford Pilcher , Partner at Bonaccord Capital Partners , to unpack the ins and outs of the GP stakes strategy—why it’s more than just a passive investment and how it’s reshaping the mid-market PE landscape.

From capital formation to smart product diversification and talent strategy, Brad shares how firms can fuel growth while sharpening their positioning. You’ll also hear what LPs should really be looking for, why marketing matters more than most realize and the key ingredients that separate a great PE firm from the rest.

Private Equity Firms Are Businesses Too

What is often overlooked is the fact that private equity firms are businesses in their own right, and like any business, they deserve to be invested in, managed and grown.

This is exactly how GP stakes investors approach the opportunity. Instead of simply backing a fund, they invest in the broader firm, including its platform, its people and its overall business model.

GP Stakes: Not Just a Passive Bet

As a non-control partner, the goal is not to dictate decisions but to collaborate by offering strategic guidance, operational insight and long term support to help the firm grow and evolve.

In practice, this means becoming actively involved in the development of the private equity firm itself:

• Product Strategy: What new fund strategies should the firm launch? How should it position those offerings in the market?
• Distribution & Go-to-Market: How do you get new products “on the shelf”? What’s the best way to expand the investor base or improve fundraising efficiency?
• Customer Diversification: Are there concentrated LP relationships? How can the firm broaden its investor mix across geographies or types?
• Talent Development: How do you attract, retain, and promote top-tier professionals to support long-term scalability?
• Financial Optimization: How should the firm structure its cost base, fee model, or profit-sharing structure for sustainable growth?
• M&A & Capital Strategy: Should the firm acquire a specialty team? Pursue a merger? Seek outside financing?

In short, investing in a GP stake is no different from investing in a high-growth company in any other sector—whether it makes widgets or writes software. The difference lies in the product (private equity funds) and the customers (limited partners), but the core business principles remain the same.

Why GP Stakes Offer More Than Just Fund Access

Limited Partners (LPs) have long enjoyed access to high-performing funds, benefiting from the returns generated by top-tier firms. But investing in GP stakes offers a fundamentally different value proposition. So, why would an investor choose this approach?

LP vs. GP Stakes: What’s the Difference?

As Bradford puts it, "Why should you own Apple stock rather than just buying iPhones." The two may be connected, but they represent fundamentally different types of value.

Similarly, when you buy a GP stake, you're not just buying into fund performance—you’re acquiring a share of the firm's entire economic engine. This includes:

1. Fee-Related Earnings (FRE): GP stakes give investors a share of recurring management fees—that 2% that comes in every quarter, regardless of market conditions. It’s steady, predictable income that’s uncorrelated with fund performance.
2. Carried Interest Participation: GP stake holders also share in carry—the performance-based upside typically reserved for the GP. Like LPs, you're exposed to fund performance, but with potentially higher upside thanks to participation in this incentivized profit-sharing.
3. Balance Sheet Ownership: Investors also gain partial ownership of the GP's balance sheet, which is often used to co-invest in the firm’s own funds. This further aligns the GP’s interests and allows for capital appreciation alongside the firm's success.

One of the less obvious, but critical, benefits of GP stakes is vintage diversification. LPs invest in specific funds tied to a single vintage year—say, a 2024 buyout fund. But when acquiring a GP stake, you get exposure to multiple vintages across various strategies.

This blend creates a hybrid return structure—part fixed income, part equity, part venture—all within a single investment. It’s a broader, more diversified, and often more resilient way to participate in the private equity ecosystem.

Past Results Are Just a Starting Point

While track record is impressive, it is only part of the equation. Past performance alone cannot drive an investment decision. What matters just as much is a firm’s ability to sustain that success through:

• A clear and repeatable investment playbook
• Strong team depth and operational resources
• Strategic focus and long-term scalability

In GP stakes investing, due diligence begins with evaluating the firm’s investment philosophy, discipline, and execution—not just its financials. Like many LPs, investors are looking for proof that strong returns come from a repeatable and well-structured model, not from luck or timing.

Want more insights? Check out the full conversation with Bradford👇

Private Equity Value Creation is a podcast about the innovative approaches leading investors, operators, advisors and bankers employ to drive sustainable growth and create enterprise value. Hosted by Shiv Narayanan.

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