The biggest private equity story of 2025 may be the meteoric rise of continuation vehicles.
Welcome to the Alts Sunday Edition 👋
Hope you enjoyed last week’s issue: Do IPO’s still matter?
In that piece, Brian Flaherty argued that if IPOs stay frozen, private equity firms may start using public markets (and even your 401k) as a dumping ground for assets they can’t sell upstream.
But there’s another outlet that’s quickly & quietly becoming just as important: “Continuation Vehicles.”
Continuation vehicles (or CVs) are like pressure valve for private equity. When a fund reaches the end of its life but the GP doesn’t want to sell a prized company, they roll it into a brand-new vehicle. Existing investors can cash out or stay in, and new investors get the chance to join.
But what was once a niche, seldom-used tool has now become a mainstream solution to the private equity liquidity crunch. Deals are getting bigger and more frequent than many outsiders realize.
I’m in Singapore this week for the TOKEN2049 conference and the F1 race, so to break down what’s going on I’m honored to introduce you to Leyla Kunimoto, who writes one of my absolute favorite Substack newsletters, Accredited Investor Insights.
In today’s issue, Leyla digs into what the hell is happening inside these transactions, why they are controversial on pricing, fees, and conflicts, and what this shift signals for the industry at large.
She’ll explain:
- ✅ What continuation vehicles (CVs) are
- ✅ Why they’re booming
- ✅ How CVs change fund lifecycles
- ✅ Who really controls the timing of liquidity, how “crown jewels” get repriced
- ✅ Why LPs are increasingly split on whether to roll or cash out.
Most importantly, we examine what this surge says about the balance of power between GPs and LPs, and how private markets will look if CVs become the default path to liquidity.
Note: This piece was first published in Leyla Kumimoto’s Accredited Investor Insights. It was originally behind a paywall, but Leyla has shared it freely here with the Alts community. Some light edits have been made.
Let’s go 👇
Leyla Kunimoto is a full-time investor and recovering spreadsheet monkey who writes about private markets from the retail LP seat. In 2024 she co-founded Accredited Investor Insights, a platform designed to bridge the information gap for high-net-worth investors by providing objective insights and education in both private and public markets. Originally from Russia, Leyla now lives in Seattle.
Table of Contents
What are continuation vehicles?
Let’s zoom out for a second. Before a continuation vehicle even enters the picture, you’ve got the classic private equity playbook: a GP raises a fund, buys a handful of companies, and works to grow their value.
A fund’s life is typically around ten years, at which point the GP is supposed to sell and return capital to investors.
Exits usually fall into one of three buckets:
- IPO (taking the company public)
- Sale (to a competitor, strategic buyer, or another PE sponsor)
- Continuation vehicle
That last one, continuation vehicles, or CVs, is where things get interesting.
A CV is a fund the GP sets up specifically to keep owning a company (or a few of them) past the original fund’s expiration date. Broadly, CVs fall into what’s called a “secondary” market – it’s a GP-led secondary transaction (a fund sponsor initiates this).
Continuation vehicles themselves fall into two buckets:
- Single-asset CVs, or funds that hold one portfolio company
- Multi-asset CVs (funds that hold several portfolio companies)
There are some important pricing differences between the two, as we’ll see later in this article.
The mechanics are straightforward, but the implications are not:
The GP identifies specific companies, or “assets” (aka “trophy assets” or “crown jewels”) that have performed well and are believed to have further growth potential, and transfers them from the old fund to a new, purpose-built continuation fund, which is also managed by the same GP.
At that point, existing LPs have a choice: cash out, or “roll” into the continuation fund to stay invested. Unlike a standard 10-year PE fund, these vehicles tend to be shorter in duration, usually five to seven years.
Two examples of continuation funds
Take two recent examples:
- A subsidiary of the Abu Dhabi Investment Authority (ADIA) led a ~$230 million single-asset continuation vehicle for GL Capital for SciClone Pharmaceuticals. The deal lets GL Capital hold onto SciClone, first taken private in 2017, re-listed in Hong Kong in 2021, and taken private again last year, while giving liquidity to existing LPs.
- In August 2025, Accel-KKR closed a $1.9 billion single-asset continuation fund for isolved, a human capital management software provider it has backed since 2011. What makes this notable is that it’s essentially a “continuation vehicle squared.” Back in 2019, Accel-KKR had already rolled isolved into a $1.4 billion multi-asset continuation fund, fueling a tripling in both revenue and profitability.
So, you can see how CVs are like a “second life” for a fund’s favorite child.
And while CV² deals are still rare, first-generation continuation vehicles are rapidly becoming a dime a dozen in today’s private markets.
(Private equity is not the only domain, either: private credit is starting to see an uptick in similar structures.)
Why are continuation vehicles booming?
For investors, continuation vehicles are a symptom of a bigger issue: the exit drought.
As we discussed last week, for the last few years, traditional exits like IPOs and M&A (mergers and acquisitions) have been sluggish, creating a major logjam.
GPs have been under pressure to provide distributions to LPs, and a GP-led secondary is a way to create that liquidity without a traditional sale.
Private equity firms are sitting on trillions in unrealized assets, with IPOs stalled and strategic buyers scarce. That backlog has pushed more capital into secondary markets, where deals like CVs have become the release valve.
In a nutshell: if you want to understand why GP-led secondaries have exploded, it’s because traditional exits simply aren’t there.
And the numbers are staggering (continuation vehicles are “GP-Led Transactions” on this chart):
And the trend isn’t slowing down – with record dry powder, there is a lot of appetite for secondary funds.
What do these mean for investors like you?
On paper, the pitch for a continuation vehicle is hard to argue with. If you’re already an LP in the fund, rolling your interest lets you keep exposure to a strong-performing asset and deepen your partnership with a GP you know well.
But here’s the kicker: roughly 90% of existing LPs choose to cash out instead of rolling forward.
For “new” LPs (those evaluating whether to come into a continuation fund from the outside) the due diligence questions are aplenty.
Even if you’ll never invest directly in a continuation vehicle, these structures ripple outward. Pension funds, sovereign wealth funds, and large endowments are some of the biggest LPs in CVs — and those institutions influence the portfolios of millions of retail investors through 401ks, mutual funds, and ETFs.
On top of that, listed secondaries funds are increasingly active buyers in this space. Which means that when CVs gain traction, there’s a good chance your retirement account or publicly traded holdings are indirectly along for the ride.
Challenges and risks
The reality is that continuation funds, while offering benefits, come with a “labyrinth of concerns” for LPs. These are not your average private equity deals.
1. It’s the mother of all conflicts of interest
This is the big one, and the criticism you should pay closest attention to. In a continuation fund, the GP sits on both sides of the table – selling the asset on behalf of the old fund’s LPs, and buying it back on behalf of the new continuation fund.
That dual role creates an obvious incentive for self-dealing or pushing favorable pricing.
Yes, there are third-party bankers and a formal valuation process involved, but the conflict is baked into the structure.
2. Overvaluation pricing games
Another common critique: the GP has every reason to push the valuation higher when moving an asset into a continuation fund.
Why? Because a higher price locks in more carried interest for the GP and flatters the track record of the old fund. That can work out fine for existing LPs who cash out, but it leaves new investors in the continuation fund holding the bag if the entry price proves inflated.
Data on pricing tells its own story. Remember the difference between single-asset and multi-asset CVs?
It turns out that multi-asset CVs trade at a higher discount to NAV. Perhaps due to higher conviction of the fund manager in case of single-asset CVs, or lack of visibility into the holdings of multi-asset funds? We can only speculate.
3. Undervaluation pricing games
I’m not making it easy for you, am I?
Conversely, the GP could undervalue the asset to make the new continuation fund look like a bargain for incoming investors! That sets up the GP for bigger future carried interest—but at the expense of the original LPs who are effectively selling too cheap.
The built-in misalignment comes from this dual objective: maximize returns for the “old” LPs, and simultaneously maximize profits for the “new” ones.
4. Fees and carried interest resets
Continuation funds often come with a new set of economics that can be detrimental to LPs. While management fees might be slightly lower, carried interest is typically reset based on the asset’s current Net Asset Value (NAV), not the original investment cost.
This allows the GP to “crystallize” performance fees based on unrealized gains, which can dilute your overall returns if you choose to roll over.
5. The “crown jewel” conundrum 👑
The term “crown jewel” sounds great, but it’s a double-edged sword. It implies high quality, but it also suggests that the easiest and most accessible value-creation levers (such as initial operational improvements or debt paydown) have already been pulled.
The “next phase” of growth might require a different skill set or offer less upside than the initial investment, so your due diligence needs to focus on the GP’s new value-creation plan for the asset.
Closing thoughts
Continuation vehicles aren’t going anywhere.
The backlog of unsold assets in private markets is immense, and continuation vehicles, along with other secondary structures, have become the release valve. Expect to see a deluge of continuation vehicles in the future.
For GPs, they’re a tool to buy time and show liquidity when IPOs and M&A won’t cooperate. But as CVs begin to trickle down to retail and less experienced investors, the risk grows.
I talk a lot about incentives, and in case of CVs, incentives can tilt toward GPs, when the right checks and balances are not in place.
As these deals become more prevalent, more are being packaged for retail and less sophisticated investors, who may lack the tools to distinguish between a genuine opportunity and a GP-friendly recycle.
The question for LPs, then, is not just whether continuation funds will reshape the exit landscape, but whether investors can sharpen their acumen enough to separate the wheat from the chaff.
The following is the recommendation from ILPA (CFA Institute supports this recommendation).
Best practice: The Status Quo Option ILPA calls for the following conditions to apply to rolling LPs:
- No change in the management fee base, and no increase in its rate
- No increase in carried interest, no decrease to the preferred return hurdle, and no other changes to the distribution waterfall favorable to the GP
- No crystallization of carried interest for rolling investors
📚 Additional Reading
- CFA Institute’s “Continuation Funds: Ethics in Private Markets, Part I”
- ILPA’s “Continuation Funds: Considerations for Limited Partners and General Partners.” A go-to framework co-created with LPs and GPs that sets clear expectations (LPAC workflows, transparency, and fair timing) for continuation fund deals.
- “The Rise of Private Equity Continuation Funds” by Kobi Kastiel & Yaron Nili. The first deep-dive academic study mapping how—and why—continuation funds have disrupted the traditional PE lifecycle, spotlighting conflicts, LP behavior, and policy implications.
- Evercore Full-Year 2024 Secondary Market Survey Results. A comprehensive, record-setting snapshot of the secondary market: transaction volume, activity and dry powder stats.
—
That’s it for today!
I’m happy to give Alts subscribers a special discount to Accredited Investor Insights. Use code ALTS for 15% off an annual subscription.
Disclosures
- This piece was first published in Leyla Kumimoto’s Accredited Investor Insights.
- It was originally behind a paywall, but Leyla has shared it freely here with the Alts community.
- Some light edits have been made by Stefan von Imhof.
- This issue was sponsored by Windlift
- Alts has no holdings in any companies mentioned in this issue.
