Podcast Summary: **To the Extent That... — VC Law: Episode 40

GP-Led Secondary Transactions with Ruth Jin, Partner at Mintz Levin**
Date: August 26, 2025
Host: Gary Ross
Guest: Ruth Jin

Episode Overview

In this episode, host Gary Ross is joined by Ruth Jin, a seasoned private funds and capital markets attorney and Partner at Mintz Levin, to discuss the increasingly prominent topic of GP-led secondary transactions in the private equity world. Ruth shares her journey in the legal industry before delving deeply into the mechanics, motivations, and legal considerations of both LP-led and GP-led secondary deals. The conversation is rich in practical insights, real-world scenarios, and expert tips for practitioners in fund formation and secondary transactions.

Guest Background & Career Path

• Ruth Jin introduces herself as a veteran capital markets and private funds attorney (02:47), drawing on over 20 years of experience helping funds navigate capital flows—what she calls “life to the economy.”
• Ruth shares her multicultural background, fluency in Korean, Chinese, and Japanese, and commitment to supporting global business and capitalism (01:00–02:27).
• Transition from boutique firm co-founder to “big law” at Mintz Levin discussed, highlighting the empathy gained from running a business (03:53–04:30).

Key Discussion Points and Insights

1. LP-Led Secondary Transactions (05:24–09:08)

• Definition: When an LP sells its interest in a fund to another LP prior to the fund’s expiration.
• Typical Drivers: Liquidity needs, portfolio rebalancing.
• Process: Generally bilateral, requiring GP consent due to confidentiality and fund documentation.
• Ruth observes an increasing willingness by GPs to facilitate these transactions given the illiquidity and extended lifecycles of private funds.
  • "Recently... many funds extend their terms, so the LPs need to hold on to that asset for a long time. So the GPs are very accommodating to the LPs in terms of helping LPs to sell and exit." (06:24, Ruth)
• GP Involvement: GPs help find buyers, review NDAs, and often require their own forms/agreements.
• Practitioner Tip: Check if the fund has a required template for transfer agreements to avoid redundant negotiation (08:14).

2. GP-Led Secondary Transactions (09:08–26:43)

What Are GP-Led Secondaries? (09:11)

• Definition: GP (General Partner) initiates a liquidity process, most commonly transferring selected assets from an existing fund to a newly formed “continuation fund.”
• Motivation: Desire to hold high-performing assets longer than fund term would allow, while providing liquidity to legacy LPs.
  • "GP wants to hold onto that asset, double down on that asset... form another fund and transfer it... to that new fund, otherwise known as a continuation vehicle." (10:12, Ruth)
• Conflict of Interest: GP represents both selling and buying sides, thus must navigate fiduciary duties carefully.
• Third-party Valuations: Nearly universal—"99.9%" of deals involve independent valuations and fairness opinions to mitigate conflict (11:52).

Side Pockets vs. Continuation Vehicles (13:26–15:23)

• Side Pockets: Contractual arrangements within the same fund, used less frequently for illiquid assets.
• Continuation Funds: Newly formed vehicles with negotiated terms, fundraising from secondary LPs, and subject to new due diligence.

Investor Decisions and Process (15:23–19:57)

• LPs are presented with a disclosure package and given 20+ days to elect to “roll” into the new vehicle or cash out.
• Outcome depends on participant appetite; if insufficient new LP capital, GP might use a credit facility to pay cashing-out LPs.
  • "If you don't have enough secondary LPs coming in, but then a lot of legacy LPs want to cash out, there's no closing happening..." (17:18, Ruth)

Single Asset vs. Multi-Asset Continuation Funds (19:02–19:57)

• Single-Asset: Most common due to complexity and customization required.
• Multi-Asset: More challenging, logistically and tax-wise.

Typical Timing & Market Trends (20:08)

• GP-led secondaries can occur late (fund year 9+) or even earlier for high-performing assets or when follow-on capital is needed.

Commercial Terms (23:03–26:43)

• Duration: Usually 5 years + 1-year extension, not a “10+2."
• Fees: Lower management fee (1% or less), tiered and performance-based carry structure.
• Lead Secondary Investor: Often receives management fee discounts as incentive.
• Transactional Expenses: Often split between selling and buying funds; highly negotiated.

3. Managing Conflicts and Fiduciary Duties (26:43–29:26)

• Full disclosure is critical (“proxy statement style”), with at least 20 days for LP review—avoid holidays to ensure fairness.
  • "In case the SEC examines your fund, you don't want to have undisclosed conflict interest..." (27:18, Ruth)
• Use of independent fairness opinions, conflicted committee procedures, and conflict-of-interest questionnaires for LPAC members.

4. Alternatives to GP-Led Secondaries (29:26–34:00)

• Tender Offers: Allows LPs to cash out by selling to a feeder (secondary) fund; GP facilitates but does not actually transfer asset out.
• Equity Strip Sales: Sale of preferred equity, profit-sharing, or partial interest in portfolio companies when additional capital is needed.
• Stapled (Paired) Secondaries: Buyer acquires both an existing interest and commits to new fund(s)—win-win for GP and buyers.

5. Practical Guidance & Notable Pitfalls (34:00–35:26)

• Plan for unexpected LP behavior (over-subscription to roll or cash out).
• Ensure availability of credit facilities if too many LPs opt to cash out.
• Carefully assess additional capital required for the transferred asset.

6. Market & Legal Trends (35:26–36:58)

• Shift toward fund documentation drafted to ease secondary transactions—"documents now is making it easier and more acceptable to do ... secondary transactions." (36:36, Ruth)
• Time lag in legal documentation—newer funds more likely to include robust secondary processes.

Memorable Quotes & Moments

• “The capital to economy is just like blood to human body... a healthy capital flow is like life to the economy.”
  — Ruth Jin (01:17)

• “Almost 99.9% the valuation is done [by third party]”
  — Ruth Jin (11:51)

• “You want to give [LPs] at least 20 days—December 15th to January 5th might not work.”
  — Ruth Jin and Gary Ross (28:12)

• “Having the credit facility is very, very important to make sure that you have enough money to pay out [cashing-out LPs].”
  — Ruth Jin (34:45)

Timestamps for Key Segments

• Guest background & law career: 00:47–04:30
• LP-led secondary transactions: 05:24–09:08
• GP-led secondary transactions: core concepts: 09:08–13:26
• Side pockets vs. continuation vehicles: 13:26–15:23
• LP elections, cash-out mechanisms: 15:23–19:57
• Single vs. multi-asset continuation funds: 19:02–19:57
• Timing of GP-led secondaries: 20:08–21:45
• Term & economics of continuation vehicles: 23:03–26:43
• Addressing conflicts of interest: 26:43–29:26
• Alternatives: tender offers, equity strip, stapled secondaries: 29:26–34:00
• Pitfalls & practical guidance: 34:00–35:26
• Market/documentation trends: 35:26–36:58

Tone and Language

The dialogue is conversational yet technical, with Gary Ross prompting real-world scenarios and Ruth Jin providing authoritative, practical explanations. The tone is collegial and informative, reflecting deep experience and aiming to clarify complex concepts for practitioners and fund professionals.

This episode is invaluable for fund counsel, GPs, LPs, and anyone eager to understand the evolving market of secondary transactions and the practical realities of navigating them.