Continuation Vehicles: The game-changer in Private Equity Liquidity Management

The private equity secondaries market has witnessed remarkable innovation in recent years, with continuation vehicles emerging as a powerful solution to one of the industry's most persistent challenges: liquidity management.

What Are Continuation Vehicles?

Continuation vehicles, sometimes called "continuation funds," allow general partners (GPs) to transfer select portfolio assets from an existing fund nearing the end of its lifecycle into a new vehicle. This mechanism provides existing limited partners (LPs) with a choice: cash out their positions or roll their interests into the new fund for extended ownership.

Solving the Liquidity Puzzle

Traditional private equity funds operate on fixed timelines, typically 10-12 years. But exceptional portfolio companies don't always align with fund lifecycles. Continuation vehicles address this timing mismatch by:

Creating Optionality: LPs can choose between immediate liquidity and continued exposure to high-performing assets

Extending Hold Periods: GPs can retain ownership of their best investments without being forced into premature exits

Generating Immediate Returns: LPs seeking liquidity receive cash distributions, often at attractive valuations

Market Impact and Growth

The continuation vehicle market has exploded, with transaction volumes reaching record highs. This growth reflects both the maturation of the secondaries market and the recognition that one-size-fits-all exit timelines don't optimise value creation.

These vehicles have become particularly valuable in today's environment, where traditional exit routes face headwinds and high-quality assets warrant extended hold periods to maximise value.

The Win-Win Dynamic

What makes continuation vehicles particularly compelling is their ability to satisfy diverse LP needs simultaneously. Risk-averse LPs or those requiring liquidity can exit, while growth-oriented LPs can maintain exposure to proven winners. Meanwhile, GPs retain control over their best assets without dilutive external sales processes.

Real-World Success Stories

The continuation vehicle market isn't just theoretical—it's producing significant transaction volumes across diverse sectors:

Vista Equity Partners is reportedly exploring a $2 billion continuation fund for its Cloud Software assets, demonstrating the scale these vehicles can reach for high-performing technology investments.

Calera Capital successfully completed a $750 million single-asset continuation fund for ImageFIRST, a healthcare laundry service company, with backing from Goldman Sachs, Blackstone, and TPG.

GenNx360 Capital Partners utilized a $400 million continuation fund backed by Blackstone and Neuberger Berman to support the growth of Precision Aviation Group, an aviation maintenance and repair company.

These examples illustrate how continuation vehicles are being deployed across industries—from healthcare services to aviation to technology—proving their versatility as a liquidity solution.

Looking Forward

As the private equity industry continues to mature, continuation vehicles represent more than just a liquidity tool—they're becoming a strategic component of modern portfolio management.

For LPs, they offer unprecedented flexibility.

For GPs, they provide a pathway to optimise value creation timelines.

What are your thoughts on continuation vehicles? Have they played a role in your investment strategy?