Continuation Vehicles: The Evolution from Unique Liquidity Options to Mainstream Private Markets Exit Solutions

Continuation vehicles have evolved over the last few years from niche solutions to mainstream liquidity solutions for private market exits. Initially an attractive investment alternative in difficult exit environments, they have become a permanent tool in the private equity lifecycle, with heavily negotiated, detailed fee schedules.

Continuation funds allow a general partner (GP) to transfer one or more assets from an existing fund into a newly created vehicle, giving existing LPs the option to cash out or roll forward their interests while allowing the GP to continue managing the asset.

This article will discuss why the new iteration of continuation vehicles remains attractive and a handful of best practices they should consider for limited partner (LP) communications, valuations, economic transparency, and more.

Key Takeaways

• Continuation vehicles have moved from a niche liquidity mechanism to a mainstream private equity exit alternative, with GP-led secondary volume reaching record levels in 2025.
• Single-asset continuation vehicles remain a popular structure, particularly where sponsors believe a portfolio company has additional runway for value creation.
• LP scrutiny remains a concern due to the strategy’s popularity, but it is an achievable hurdle with proper planning and communication.
• Regulatory attention continues to focus on conflicts of interest, disclosures, and valuation practices in adviser-led secondary transactions and continuation funds.
• The next phase of the market presence around these strategies will likely favor sponsors that can demonstrate clear process discipline, strong governance and transparency, and genuine alignment, which will also lead to credible track records.

The Appeal of Continuation Funds

Continuation funds remain popular because private equity funds still need liquidity, which has not always been provided through traditional exits. In addition, GP-led secondaries and continuation vehicles are being used by managers to facilitate distributions to existing LPs and navigate fundraising challenges in the absence of traditional asset sales. While the alpha generated by these strategies is mixed, continuation vehicles remain an attractive solution and have diversified beyond traditional buyout assets into other niche strategies.

Investors continue to prefer single-asset continuation vehicles. For GPs, a single-asset continuation vehicle provides more time to execute a value creation thesis, rather than forcing a sale simply because the original fund is nearing the end of its life or the GP needs to manage investor expectations. For incoming investors, the structure offers exposure to a known, already-vetted asset. For existing LPs, it provides optionality: the choice to roll their stake into the new vehicle or sell and exit.

Best Practices for the Next Generation of Continuation Vehicles

Start LP Communication Early and Consider Giving the LPAC a Meaningful Role

Early and continuous LP engagement — backed by standardized, transparent information that helps LPs make informed sell-or-roll decisions — will remain the key differentiator. Limited partner advisory committee (LPAC) approval can help address conflicts of interest, but only if the LPAC has sufficient time, information, and access to independent advisers to evaluate the transaction properly.

Valuation Policies and Procedures Are Essential

Valuation and fairness opinions have shifted from “nice to have” to “preferred,” and they are a primary focus area, as the transfer price determines what selling LPs receive and what incoming investors effectively pay. There are certain structural economics that can help mitigate this concern.

However, a fairness or valuation opinion doesn’t eliminate potential conflicts of interest; when paired with a competitive transaction process, LPAC review, and robust investor disclosure, the opinion becomes more defensible. Investors increasingly want to understand the underlying assumptions, methodologies, and limitations, and their requests are becoming more rigorous.

Transparency on Disclosure of Economics

Continuation vehicles may involve new management fees, carried interest resets, crystallized carry, transaction expenses, and follow-on capital needs. These economics should be clearly communicated so investors can understand the impact of rolling, selling, or partially participating.

Document the Business Rationale

Sponsors should be able to explain why the continuation vehicle is preferable to other available alternatives, including its benefits and risks. “We like the asset” may be true, but it does not stand alone as a governance rationale.

The Path Forward: Continuation Vehicles Are Growing Up

Continuation vehicles have entered a more mature phase. They are no longer simply a creative solution for funds, but they are becoming an established part of private markets portfolio management. That maturation brings benefits, optionality, extended value creation, and expanded investor participation. It also raises expectations for governance, valuation, disclosure, and fiduciary discipline. For further discussion on how EisnerAmper can help your continuation vehicle, please use the form below to contact our team.