The traditional PE model—GPs exit assets and LPs reinvest—is breaking down. GPs no longer trust that overallocated LPs will "round trip" capital into their next fund. This creates a powerful incentive to use continuation vehicles to retain assets, grow fee-related earnings, and avoid the fundraising market.

A key evolution in private equity is holding top companies beyond the typical fund lifecycle. Continuation vehicles allow firms to retain their "trophy assets," offering liquidity to LPs who want to exit while allowing the firm and other LPs to benefit from continued growth.

Borrowed from private equity, continuation funds allow a GP to move a prized asset from an old fund into a new vehicle they still control. This provides liquidity to LPs in the original fund who can choose to cash out, while others can roll over and continue to ride the winner.

General Partners (GPs) have shifted from viewing secondary sales as an LP-driven nuisance to a strategic tool. They now facilitate liquidity for investors to maintain their reputation and use continuation vehicles to retain top-performing assets beyond a fund's original lifespan.

While secondaries and continuation vehicles have surged to account for 20% of PE exits, David Sambur views this as an unsustainable peak caused by weak M&A and IPO markets. He predicts the market will normalize to a more sustainable equilibrium of around 10% of total exit volume over time.

An estimated 15-20% of all private equity "distributions" in the last two years were not traditional sales or IPOs, but "inorganic" transactions like continuation funds and NAV loans. This means the actual yield from organic, market-driven exits is even lower than the already-dismal headline numbers suggest.

The most successful continuation vehicles (CVs) are considered alongside traditional M&A and IPO routes from the outset. Treating a CV as a fallback option when other exits fail can make the deal less attractive to secondary buyers, who scrutinize the narrative and may perceive it as a low-priority opportunity.

Originally designed in private equity post-GFC to manage single assets, the continuation vehicle is now being applied to the private credit market. Its primary use case has shifted to liquidating entire funds, providing a novel exit route for LPs in funds that have extended beyond their expected life.

For a continuation vehicle (CV) to be credible, the General Partner (GP) must demonstrate strong conviction by reinvesting significantly. This proves the asset has substantial remaining upside ('juice left'). Secondary buyers view this alignment as a critical sign that the GP is re-risking alongside them, not just de-risking their own position.