LPs are developing new selection criteria to filter managers. They will actively screen out GPs who lean too heavily on continuation vehicles as a default liquidity solution or who prioritize scaling their own firm's growth through retail capital, due to concerns about conflicts of interest and alignment.

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.

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.

To combat mistrust in CV valuations, LPs are advocating for a concept dubbed 'schmuck insurance.' This mechanism would penalize or claw back economics if a GP sells an asset out of a CV within a short period (e.g., 12 months), undermining the original thesis that the asset required a longer hold for value creation.

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.

ILPA's CEO reveals a major disconnect: while LPs frequently take liquidity from continuation vehicles (CVs), this action is not a vote of confidence. It's often driven by practical constraints like governance hurdles, short decision timelines, and resource limitations that prevent them from rolling their investment, not a belief in the CV's merits.

The rigid 10-year fund model is outdated for companies staying private longer. The future is permanent capital vehicles with hedge fund-like structures, offering long durations and built-in redemption features for LPs who need liquidity.

Contrary to the market's growing reliance on continuation vehicles (CVs), LPs have a clear and consistent preference for traditional liquidity paths. Data shows 56% of LPs would rather see a conventional exit, even if it's below the marked value, and 40% would prefer holding the asset longer, compared to just 24% who favor a CV.

When a portfolio company is public, liquid, and highly appreciated, some VCs distribute shares directly to their Limited Partners (LPs). This tactic returns value while allowing each LP to decide whether to hold for further upside or sell for immediate cash, effectively offloading the hold/sell decision.