Key Takeaways
- • LP reliance on external managers declined sharply to 70% in 2025, down from 86% in 2023, reflecting a strategic shift toward direct involvement and co-investment alongside fund managers.
- • Co-investment participation surged to 56% of surveyed LPs in 2025, up five percentage points year-over-year, as institutional investors seek greater control over capital deployment and investment strategy decisions.
- • GP stakes—minority ownership positions in asset management firms themselves—are gaining traction as LPs pursue exposure to recurring management fees and equity-like upside from manager economics, typically representing approximately 20% of GP firm ownership.
- • 54% of LPs surveyed intend to increase allocations to alternative investments, marking the fourth consecutive year of growth in this category despite broader market volatility.
- • Asset managers must prioritize transparency and trust-building mechanisms to remain competitive, as LPs increasingly demand deeper partnerships and visibility into investment processes rather than passive capital commitments.
Summary
Limited partners are fundamentally reshaping their relationship with asset managers, moving away from traditional passive capital deployment toward active co-investment and direct ownership stakes in GP firms themselves. According to Dynamo Software's fourth global survey of limited partners, institutional investors are signaling a clear preference for hands-on involvement in private markets investments. The data reveals a pronounced trend: the percentage of LPs relying exclusively on external managers fell to 70% in 2025, a significant decline from 86% just two years prior.
This shift reflects broader LP priorities around control, transparency, and alignment with manager decision-making. Co-investment activity has accelerated meaningfully, with 56% of respondents indicating plans to invest directly alongside managers—a five-percentage-point increase from the prior year. Dynamo Software CEO Hank Boughner characterized this movement as LPs seeking "a greater say in how their capital is deployed," noting that asset managers must now "double down on strategies that foster transparency and trust" to remain central to value creation.
Complementing co-investment strategies, GP stakes have emerged as an increasingly popular vehicle for deeper LP-GP partnerships. These typically involve LP acquisition of minority ownership—roughly 20% of the GP firm—providing direct exposure to recurring management fee economics alongside equity-like upside from the underlying management company. As Tom Bratkovich, CIO of DCA Family Office, explained, "GP stakes are compelling for allocators because they provide a path to receive equity-like upside from the underlying economics of the management company itself, along with the ballast of recurring management fees."
Despite economic uncertainty, institutional appetite for alternative investments remains robust. Fifty-four percent of surveyed LPs plan to increase allocations to alternatives, marking the fourth consecutive year of growth in this category. This sustained interest, combined with LP demand for structural changes in manager relationships, suggests that GP firms must adapt their engagement models or risk losing capital to competitors offering greater transparency and partnership frameworks.
This shift reflects broader LP priorities around control, transparency, and alignment with manager decision-making. Co-investment activity has accelerated meaningfully, with 56% of respondents indicating plans to invest directly alongside managers—a five-percentage-point increase from the prior year. Dynamo Software CEO Hank Boughner characterized this movement as LPs seeking "a greater say in how their capital is deployed," noting that asset managers must now "double down on strategies that foster transparency and trust" to remain central to value creation.
Complementing co-investment strategies, GP stakes have emerged as an increasingly popular vehicle for deeper LP-GP partnerships. These typically involve LP acquisition of minority ownership—roughly 20% of the GP firm—providing direct exposure to recurring management fee economics alongside equity-like upside from the underlying management company. As Tom Bratkovich, CIO of DCA Family Office, explained, "GP stakes are compelling for allocators because they provide a path to receive equity-like upside from the underlying economics of the management company itself, along with the ballast of recurring management fees."
Despite economic uncertainty, institutional appetite for alternative investments remains robust. Fifty-four percent of surveyed LPs plan to increase allocations to alternatives, marking the fourth consecutive year of growth in this category. This sustained interest, combined with LP demand for structural changes in manager relationships, suggests that GP firms must adapt their engagement models or risk losing capital to competitors offering greater transparency and partnership frameworks.
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