How LPs Evaluate GP Alignment on Fund Recycling

In this episode, Lucas and Luna dive into a rarely discussed but crucial element of venture capital limited partner due diligence: how GPs structure fund recycling. Using the example of a hypothetical growth-stage fund with a 2.5x target, they explain the mechanics of recycling—how proceeds from early exits get reinvested rather than distributed—and why the policy materially affects LP returns. They break down the key questions: How much can be recycled? For how long? Does recycling dilute the carried interest? They also walk through a concrete scenario where recycling boosts gross returns but shifts the timing of distributions, and why some LPs push for caps while others accept flexible policies. The hosts touch on how recycling interacts with vintage year IRR, DPI multiples, and the J-curve, and they close with a practical tip for LPs reviewing a partnership agreement. This episode is essential listening for institutional investors and anyone curious about the levers that shape venture fund outcomes. #FundRecycling #LPDueDiligence #VentureCapital #LimitedPartners #GPAlignment #CarriedInterest #FundTerms #PrivateEquity #VCInvesting #IRR #DPI #JCurve #PartnershipAgreement #Finance #Business #FexingoBusiness #BusinessPodcast #InvestmentStrategy Keep every episode free: buymeacoffee.com/fexingo