Fund Structure
Distribution in Specie
A distribution of actual securities (like stock in a public company) to LPs rather than converting to cash first.
A distribution in specie (also called an in-kind distribution) occurs when a fund distributes actual securities — typically shares in a publicly listed portfolio company — directly to LPs rather than selling the shares and distributing cash. Each LP receives shares proportional to their fund interest and can then decide independently when to sell.
In Practice
After the portfolio company's IPO, the fund distributed 5M shares of stock directly to LPs rather than executing a block trade. Each LP received shares proportional to their fund interest and could manage their own exit timing and tax considerations.
Why It Matters
In-specie distributions give LPs control over exit timing and tax management, but they also shift market risk and trading costs to the LP. Understanding how different LP types handle these distributions affects GP decision-making.
VC Beast Take
The debate between cash and in-specie distributions never gets fully resolved. Large institutional LPs generally prefer in-specie because they have trading infrastructure. Smaller LPs and individuals often prefer cash because they lack the ability to efficiently sell large positions.
Related Concepts
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