Exit Strategy
An exit strategy is the plan for how and when an investment will be realized to return capital and generate profit.
Definition
Definition Exit strategy defines the expected path to liquidity: sale, IPO, recapitalization, refinancing, secondary sale, or structured repayment (in credit). A credible exit strategy includes realistic timing, potential buyers or liquidity channels, and conditions under which an exit becomes harder. Allocator Context Allocators care about exit strategy because realized outcomes determine DPI and confidence in the track record. In private markets, exit environments change; allocators want managers who can navigate multiple exit paths and avoid relying on a single optimistic liquidity scenario. Decision Authority Exit realism influences IC comfort and portfolio pacing. For co-investments and concentrated positions, exit assumptions can trigger deeper scrutiny, particularly when valuation depends on a specific exit multiple. Why It Matters for Fundraising Managers build trust by showing how exits actually happened historically and how current exits are being managed. Overly certain exit projections reduce credibility; realistic pathways improve it. Key Takeaways Realizations drive DPI and LP confidence Multiple exit paths reduce dependence on one market regime Exit assumptions must be realistic and monitored Credible exit discipline improves fundraising conversion and re-ups