If you application is such that it has to do lot of allocation/de-allocation of large size objects (>85000 Bytes), its eventually will cause memory fragmentation and you app
Is there any solution to this problem or is it a limitation of CLR memory management?
There is no solution besides reconsidering your design. And it is not a problem of the CLR. Note, the problem is the same for unmanaged applications. It is given by the fact, that too much memory is used by the application at the same time and in segments laying 'disadvantageous' out in memory. If some external culprit has to be pointed at nevertheless, I would rather point at the OS memory manager, which (of course) does not compact its vm address space.
The CLR manages free regions of the LOH in a free list. This in most cases is the best what can be done against fragmentation. But since for really large objects, the number of objects per LOH segment decreases - we eventually end up having only one object per segment. And where those objects are positioned in the vm space is completely up to the memory manager of the OS. This means, the fragmentation mostly happens on the OS level - not on the CLR. This is an often overseen aspect of heap fragmentation and it is not .NET to blame for it. (But it is also true, fragmentation can also occour on the managed side like nicely demonstrated in that article.)
Common solutions have been named already: reuse your large objects. I up to now was not confronted with any situation, where this could not be done by proper design. However, it can be tricky sometimes and therefore may be expensive though.