Kensington Fund Proposes Major Overhaul Amid PE Liquidity Crunch

TORONTO, ON – February 11, 2026 – Kensington Capital Advisors Inc. has called a special meeting for unitholders of its flagship Kensington Private Equity Fund, asking them to approve a sweeping overhaul of the fund's structure. The proposed changes, which include a new redemption framework and a revamped fee model, are a direct response to the persistent liquidity challenges roiling the private equity industry.

Unitholders will gather on March 25, 2026, to vote on the proposals, which the manager argues are essential to “position the Fund for long-term success.” The move comes after Kensington suspended all redemptions on September 30, 2025, a decision that highlighted the growing difficulty for private funds to return cash to investors in a sluggish exit market.

The comprehensive plan aims to modernize the fund by introducing more predictable, albeit limited, liquidity options, simplifying its complex capital structure, and realigning the manager's financial incentives with the fund's performance. The outcome of the vote, which requires a two-thirds majority for approval, will serve as a critical test of investor confidence and a bellwether for how similar funds may navigate the industry's new reality.

A New Framework for Liquidity

The centerpiece of the proposal is a new redemption policy designed to balance investor demand for cash with the illiquid nature of the fund's underlying assets. If approved, the fund will offer quarterly redemption rights for up to 5% of its outstanding units. This replaces the previous semi-annual redemption window, which was subject to a 10% cap per share class and ultimately proved untenable, leading to the 2025 suspension.

While the new system offers more frequent opportunities for investors to cash out, it comes with a significant and potentially controversial trade-off. The manager is asking for the authority to cancel all outstanding redemption requests that were submitted prior to or during the current suspension.

Kensington states this measure is necessary “to facilitate the implementation of the revised redemption framework on a fair and equitable basis.” The rationale is to prevent a fire sale of assets at discounted prices to meet a backlog of redemption requests, an action that would harm the fund's net asset value and penalize the remaining unitholders. By resetting the queue, the manager aims to stabilize the fund and ensure its long-term health.

However, this will undoubtedly be a point of contention for investors who have been waiting for liquidity, some for many months. Their choice is now between voting for a plan that cancels their existing request in favor of a new, structured system, or voting against it and facing continued uncertainty.

Streamlining Structure and Aligning Incentives

Beyond liquidity, the proposals aim to simplify the fund's architecture and better align the manager’s interests with those of its investors. The plan includes consolidating the fund’s multiple share classes—Class A, Class F, and Class L—into a single Class G. This redesignation, based on the relative net asset value of each class, is intended to create a more transparent and streamlined structure, potentially lowering fees for some unitholders and simplifying reporting.

Perhaps most strategically, Kensington is proposing to change how its performance fees are calculated. Currently, the manager’s entitlement to this lucrative fee is tied to distributions paid out to unitholders. The new model would disconnect the two. Instead, the performance fee would be based entirely on “net realized income and net realized capital gains received by the Fund.”

This means the manager would be rewarded for successfully selling portfolio companies and generating profits at the fund level, regardless of when that cash is actually distributed to investors. The change reflects the current market reality where successful exits don't always translate into immediate investor payouts due to a fund's broader cash management needs. The manager argues this “strengthens alignment” by incentivizing profitable deal-making, which is the core driver of long-term value, rather than the timing of cash flow.

Navigating a Challenging Market

Kensington’s proposed overhaul is not happening in a vacuum. The entire private equity sector is grappling with a significant liquidity crunch. A slowdown in mergers and acquisitions and a dormant IPO market have made it difficult for fund managers to sell their portfolio companies. This has created a record exit overhang, with an estimated $585 billion in unsold assets sitting on the books of private equity firms in 2024, nearly triple the amount from a decade prior.

This backlog has slowed the flow of cash distributions back to investors, a metric known as Distributions to Paid-In Capital (DPI), which has become a primary concern for limited partners. In response, the industry has seen a surge in creative liquidity solutions, including a booming secondary market and the rise of general partner-led continuation funds.

Kensington’s strategy represents another path forward: a fundamental restructuring of an existing open-ended fund to adapt to this new environment. The fund, which has delivered a 4.2x multiple on invested capital since 2010, nonetheless saw a negative 11.5% return in the year-to-date period ending October 31, 2025, reflecting the tough market conditions that precipitated the redemption freeze.

The Unitholder's Dilemma

With the March 25 meeting approaching, the decision now rests with the unitholders. The manager's board of directors and the fund's independent advisory board have both unanimously recommended a vote in favor of the proposals, stating they are in the “best interests of the Fund and its unitholders.”

Investors must weigh the benefits of a more predictable, albeit limited, liquidity framework and a simplified structure against the immediate negative of having existing redemption requests cancelled. The vote will essentially be a referendum on whether they trust the manager's long-term vision for navigating the challenging market over their own short-term liquidity needs.

Unitholders of record as of February 10, 2026, are eligible to vote, with a proxy deadline set for March 23. A detailed Management Information Circular outlining the full scope and implications of the changes will be made available to all investors on SEDAR+, providing the crucial information needed to make an informed decision on the future of the Kensington Private Equity Fund.