Repricing Risk, Extending Hold Periods: Continuation Vehicles in Focus¹

In today's private equity environment, headlines often spotlight industry-leading firms, but for investors seeking liquidity or disciplined reentry, a lesser-known trend may be more consequential: the rise of continuation vehicles. While rarely glamorous, these secondary transactions—where general partners (GPs) move unsold assets from aging funds into new vehicles they continue to manage—are increasingly utilized.

The appeal is evident. The IPO market has stalled, delaying exits for even the most promising companies. M&A has also slowed meaningfully. During the Biden administration, enforcement agencies prioritized deterrence over action, abandoning consent decrees, extending reviews, and heightening scrutiny. As documented by Covington's February 2025 report, the result has been a backlog of companies stuck in portfolio purgatory. That backlog is colliding with LP liquidity needs.² In April, Harvard Management Company disclosed plans to sell $1 billion in private equity fund stakes, equal to 5% of its private markets exposure.³ Yale is reportedly exploring a multi-billion-dollar sale of its own.⁴ The New York Pension system, too, sold $5 billion in private equity holdings to Blackstone.⁵ The secondaries market has expanded dramatically, with continuation vehicles alone surpassing $50 billion in 2024, according to S&P Global.⁶ Still, they represent just one part of a broader landscape that includes traditional LP sales, such as those by endowments.

Annual Secondaries Fundraising Volume (in Billions)

Source: William Blair, 2024 Secondary Market Report (2024).

LPs are demanding liquidity, and GPs have the opportunity to convert a seasoned vehicle into a new one, which increases the GP's AUM and duration of fees on the asset with limited disruption to the management team. For LPs forced to decide in a short window to cash out or not, it's often not a decision process driven by the right reasons. Structure matters because GPs are effectively selling assets to themselves, and conflicts of interest are inherent, regardless of a well-managed competitive auction process. The valuation must be independently justified, typically with third-party fairness opinions. Governance must be transparent: LP advisory committee (LPAC) approval, clear rollover options for existing LPs, and a choice between liquidity or continued exposure. Overpaying is a real risk in these deals. The wrong price locks in mediocre IRRs.

GP-Led Transaction Volume

Source: Houlihan Lokey, 2024 Continuation Fund and Cross-Fund Market Insights (March 2025)

Still, when executed well, continuation vehicles create asymmetric optionality. Verbalized by the University of Chicago's Stigler Center, they give GPs something traditional fund structures don't: time.⁷ “Using this structure, GPs can continue holding assets for an extended period until these assets reach their full potential,” the authors write. “At the same time, it eliminates the need to sell the assets to another private equity fund; thus, management need not adapt to a new board of directors.”

That distinction is key. When continuation vehicles are used to extend a successful value creation plan, rather than to avoid admitting that an exit isn't possible, they can be powerful tools. Disciplined underwriting requires the right price, the right terms, and the right people. If those don't align, we wait. We're not in the business of paying carry for yesterday's headline.

In our view, continuation vehicles will remain a core part of the secondaries landscape. For investors who approach them with rigor and clarity, they offer a way to reengage with proven companies at an attractive entry point. As always, we welcome dialogue with others navigating this market or seeing similar themes emerge.