Happy Thursday and welcome. A lot of new readers here, so if you missed part 1, you can find it here.

And as always, let’s get straight to business.

In part I, I talked about the core problem: when a GP can't raise the next fund, incentives die long before the portfolio does.

Carry disappears.

The ambitious talent leaves.

And LPs end up with a manager who is structurally misaligned with the outcome we all want: timely, thoughtful exits that maximise value.

For a long time, LPs were stuck with this. But over the past decade, a new path emerged - not perfect, but vastly better than the old options.

The rise of GP-led secondaries fundamentally changed the equation.

Instead of forcing LPs to monitor their way through five more years of misaligned behaviour, the entire portfolio can be moved into a new structure:

Yes, this does reward bad performance.

But, it's not about "rewarding bad behaviour."

It's about recognizing that incentives drive outcomes - and without a reset, the default outcome is a boat with a bad rudder.

But make no mistake, this is deeply unsatisfying and emotionally frustrating for LPs:

"This GP shouldn't get another bite at the apple."

True.

But the question isn't our LP feelings or whether they deserve it.

As fiduciaries, the question is whether the reset produces a better financial outcome.

And in most zombie-fund cases, it does.

This only works if a secondary buyer actually wants to back this GP.

And many won't.

If the portfolio is truly weak, if the GP burned too much credibility, or if the track record suggests they got lucky once but can't repeat it - no sophisticated secondary buyer is writing that check.

GP-led secondaries aren't available to every zombie fund. They're only available to GPs who:

So while GP-led secondaries fundamentally changed the game, they didn't solve the problem for everyone. They just gave the salvageable zombies an exit ramp.

For the truly troubled funds? You're still stuck with the old options: wait it out, or sell your LP stake at a painful discount to someone who’s willing to take on the risk.

Consider the alternative:

It's not hard to see why the secondary reset wins.

A continuation vehicle isn't a gift - it's a way to put real incentives back into the system. And once those incentives return, everything downstream tends to improve: portfolio governance, CEO engagement, operational push, exit creativity.

LPs who want out leave cleanly.

Those who see upside can stay with eyes open.

And the GP gets one last chance - but now they have to earn it.

Zombie funds don't happen because people suddenly get lazy.

They happen because incentives break.

After watching this play out across multiple funds - and living through it with timber funds (see part 1) - I've stopped asking whether the GP "deserves" another chance.

I ask: do I want to spend 3–5 more years with a manager who has no carry and every reason to keep the fund alive? Or do I want to either cash out cleanly or re-engage with restored incentives?

The math usually answers itself.

When incentives break, the portfolio drifts.

When incentives reset, momentum returns.

GP-led secondaries aren't perfect. The pricing often stings. But they gave LPs something we never really had before: a way to take a structurally broken situation and make it functional again.

And, it is probably the best outcome for everyone - especially the employees at the newly invigorated companies.

Today, we’ve got two interesting stories about some of the new frontiers of PE.

This section above is entirely made by AI with a human-in-the-loop. If you are interested in AI use cases, please reply to this email.