The LP Reset: What Fund Managers Need to Be Ready For
For many fund managers, the past few years have presented a challenging fundraising environment.
What initially appeared to be a short-term slowdown following a period of rapid growth evolved into a longer, more formative market cycle. Fundraising slowed, exits took longer, and LP behavior shifted. While capital never left private markets altogether, it became more selective and more concentrated.
As we move through 2026, early signs suggest capital is beginning to free up again. The key question for fund managers is not just when LPs will return, but what they will expect when they do.
A slower market reshaping LP behavior
During the slowdown, LPs faced real pressures of their own, pushing them into a more defensive posture. In response, many narrowed their manager rosters, concentrating allocations into fewer, larger, and more operationally mature funds. These managers were typically supported by increasingly advanced technology, infrastructure, and governance.
Many LPs have therefore become accustomed to a higher operating standard.
They experienced:
Highly structured reporting
Institutional-grade investor portals
Clear data lineage and consistency across vehicles
Predictable processes for capital calls, distributions, and transfers
Strong coordination between investment, operations, and administration
As capital returns, expectations do not reset
As LPs begin to re-engage, early indications suggest capital availability will increase later in 2026, and the expectations LPs formed during the slowdown are unlikely to unwind.
This, combined with the continued spotlight being shined on advancements in technology, mean LPs are not returning to the market with the same tolerance they had in earlier cycles. Instead, they are coming back with:
A higher operational baseline
Greater sensitivity to reporting quality and responsiveness
Less patience for fragmented systems or manual workarounds
A clearer view of what “institutional” looks like in practice
As a result, operational readiness now sits alongside strategy and performance as a core evaluation lens, rather than something assessed only after the fact.
What fund managers should be thinking about now
As LPs re-enter the market, fund managers need to ready to answer a broader set of questions than in previous cycles.
Beyond ensuring DD materials are current, attention is increasingly shifting to:
Whether operational processes can scale as funds grow
Whether reporting is consistent, timely, and explainable
Whether investor communications feel clear and professional
Whether underlying systems support transparency
Investor portals, data management, and administrative workflows are no longer viewed as enhancements. They are signals of institutional readiness, informed by what LPs have experienced elsewhere.
Operations as a credibility factor
One of the quieter outcomes of the slowdown is that operations now play a more direct role in how LPs interpret risk.
After engaging primarily with sophisticated platforms, gaps in infrastructure are more visible than they once were. Even strong investment narratives can be undermined if the operational experience feels materially behind the standard LPs have grown accustomed to.
Looking ahead
For fund managers, this represents an opportunity. Those who align strategy, operations, and investor experience will be better positioned as LPs re-engage.
At Phoenix, we support fund managers in building operational foundations that scale and meet the higher standards LPs now expect, from reporting and data consistency to the overall investor experience. As capital returns, confidence will increasingly come from deliberate and thoughtful preparedness.