The Infrastructure CV Premium: Why LPs Question the ''Fair Market'' Price
A panel at the 2026 Infrastructure Investor Global Summit revealed a critical
The Infrastructure CV Premium: Why LPs Question the 'Fair Market' Price in GP-Led Secondaries
An analysis of the valuation skepticism emerging in the market for continuation vehicles, based on discussions at the 2026 Infrastructure Investor Global Summit.
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Introduction: The Summit Revelation – A Market of Assured Premiums
A panel discussion at PEI Group’s 2026 Infrastructure Investor Global Summit revealed a critical paradox in the infrastructure secondary market. While general partner (GP)-led continuation vehicles (CVs) for infrastructure assets are typically executed at or above a determined "fair market value," limited partners (LPs) express doubt that this represents the best achievable price (Source 1: [Primary Data]). This disconnect is not a minor pricing discrepancy but a symptom of deeper structural dynamics within private markets. The core issue lies in the definition and determination of "fair market value" within a process controlled by the party that is both seller and future manager.
Deconstructing 'Fair Market Value' in a Controlled Process
In a GP-led secondary transaction, the term "fair market price" operates under specific constraints. The process involves the GP, acting on behalf of the existing fund, selling assets to a new vehicle it will also manage. A third-party valuation firm is engaged, and a "market check" is conducted with potential lead investors. The outcome is formally at or above the appraised fair market value.
The conflict arises from inherent incentive structures. The GP’s objective is dual: to secure a high valuation for the asset to satisfy existing LPs while ensuring the new vehicle is adequately capitalized and its terms are attractive to new investors. The incumbent LPs’ primary interest is price maximization for their exit. The market check, while standard, occurs in an illiquid arena for core infrastructure assets, where the GP controls the information flow and the buyer list. This raises questions about the competitiveness of the auction and whether the process is designed to validate a price rather than truly discover the maximum price the open market would bear.
The LP's Dilemma: Liquidity Convenience vs. Price Optimization
LPs often participate in these transactions despite their skepticism due to a compelling liquidity proposition. Infrastructure assets are characteristically long-dated and complex to sell individually. A CV offers a coordinated exit. This presents a "bird in the hand" calculation: accepting a known, institutionally validated premium today versus facing the uncertainty, cost, and time required to pursue an alternative sale.
A significant factor is information asymmetry. The GP possesses superior, non-public knowledge of the asset’s operational potential, future capital expenditure plans, and the broader buyer universe. An LP cannot easily verify if all potential strategic buyers or secondary funds were solicited. Consequently, the LP must weigh the convenience and certainty of the CV against the unverifiable possibility of a superior outcome, often erring on the side of pragmatism.
Beyond Pricing: The Long-Term Strategic Implications
Persistent skepticism over CV pricing carries consequences beyond individual transactions. The fundamental LP-GP partnership is built on alignment of interests. A recurring perception that CV processes optimize for GP continuity over LP exit value can erode trust. This erosion may influence future fundraising, where institutional LPs could begin discounting net asset values (NAVs) of funds perceived as likely to employ CVs or demand specific governance clauses related to secondary processes in fund agreements.
Market structure may also evolve. If LP dissatisfaction grows, it could accelerate the development of more robust LP-led secondary markets or co-investment platforms designed to provide liquidity outside the GP-led framework. Such mechanisms would aim to bypass the perceived "CV premium" by creating alternative pathways for asset redistribution.
The Path Forward: Towards a More Transparent Market
Resolving the perception gap requires structural enhancements to the CV process. Potential solutions include mandating greater transparency in the market check, such as disclosing the breadth of buyers contacted and bids received. Some propose implementing true competitive auctions run by independent third parties or establishing clear rules where a GP must run a full sales process if a certain threshold of LP dissent is reached.
The role of data and benchmarking will be crucial. As the volume of infrastructure secondary transactions increases, independent databases tracking pricing and process outcomes could provide a more objective framework for comparison, reducing reliance on subjective assessments. The market is maturing from a niche liquidity tool into a core feature of the infrastructure ecosystem. Its long-term viability depends on processes that are not only fair in procedure but are universally perceived as optimal in outcome for all parties involved.