Continuation fund
A continuation fund transfers one or more assets from an existing private-capital fund into a new vehicle, offering current investors liquidity or continued exposure while extending the manager’s ownership period.
Definition
A continuation fund is a newly established investment vehicle that acquires assets from an older fund managed by the same sponsor, generally financed by secondary investors and sometimes existing investors that elect to roll their interests.
Purpose
Continuation vehicles can provide liquidity near the end of a fund’s life while preserving ownership of assets the manager believes require more time or capital. They are GP-led secondary transactions rather than ordinary third-party exits because the same sponsor typically influences both the selling and buying sides.
Transaction structure
Existing fund
Sells selected assets and distributes proceeds to investors that elect liquidity.
Continuation vehicle
Acquires the assets with a new term, governance structure and capital base.
Investors
Secondary buyers provide new capital; existing LPs may sell, roll or combine the two choices.
Process
- Rationale: identify assets, remaining value plan and alternatives.
- Governance: establish conflict procedures and advisory-committee engagement.
- Valuation and market test: obtain bids, analysis and any independent opinion.
- Terms: negotiate price, economics, rollover, financing and governance.
- Election and closing: provide investors sufficient information and time to choose.
Conflicts and governance
| Issue | Why it matters | Common safeguard |
|---|---|---|
| Price | The manager remains connected to both vehicles | Competitive process and independent valuation analysis |
| Investor choice | LPs choose liquidity or continued exposure | Clear disclosure and adequate election period |
| Manager economics | Fees and carried interest may reset | Transparent terms and investor approval mechanisms |
| Asset selection | Potential adverse selection between vehicles | Documented rationale and conflict governance |
Related concepts
Sources and further reading
View sources and editorial notes
- Institutional Limited Partners Association, GP-led secondary transaction guidance.
- International Private Equity and Venture Capital Valuation Guidelines.
- Applicable private-fund conflicts and disclosure regulation.
Editorial note: Continuation-fund terms and investor protections vary. This entry is a structural explanation and not investment advice.