Continuation Vehicle Strategies: Balancing GP and LP Interests

Continuation Vehicles (CVs) have become a common tool in private markets. In a  recent article by The Wall Street Journal, continuation vehicles accounted for 13% of global PE exits in 2024, a record high. These structures help investors and fund managers manage the end of a fund's life without forcing the sale of valuable assets.

In recent years, use of CVs has grown due to shifting market conditions, longer holding periods, and the need for flexible liquidity. Understanding how CVs work is important for anyone participating in private capital.

This article explains the structure, purpose, and trends related to continuation vehicles. It also outlines how CVs affect general partners (GPs), limited partners (LPs), and the broader secondary market.

What Is A Continuation Vehicle

A continuation vehicle is a specialized investment structure that allows fund managers to move select assets from an existing fund nearing the end of its term into a new vehicle. This extends the holding period while offering liquidity options to existing investors.

When a fund approaches the end of its lifecycle (typically 10 years), the manager may believe certain assets still have growth potential. Rather than selling these assets, the manager creates a new fund—the continuation vehicle—and transfers the selected assets into it.

Existing investors can choose to:

• Sell their interest and receive cash
• Roll their interest into the new vehicle
• Do a combination of both

This secondary market structure gives fund managers more time to develop assets while providing flexibility for investors who may want liquidity.

Why Interest In Continuation Vehicles Is Growing

The use of continuation vehicles has increased significantly in recent years. GP-led transactions, which include continuation vehicles, now account for about half of the private equity secondaries market.

Several market factors have contributed to this growth:

• Market Timing Challenges: Economic uncertainty has disrupted traditional exit paths like IPOs and strategic sales, making longer holding periods more attractive.
• Liquidity Flexibility: LPs facing cash constraints can access liquidity without waiting for the entire fund to liquidate.
• Value Creation Opportunities: Many assets still have growth potential at the end of a fund's life, and GPs want more time to maximize returns.
• Fundraising Complexity: A challenging fundraising environment has led managers to explore alternatives for continuing to manage high-performing assets.

This growth reflects how fund lifecycle management is evolving to better align GP and LP interests in today's market.

How Continuation Vehicles Are Structured

The structure of a continuation vehicle follows a clear process designed to balance the interests of fund managers and investors.

Asset Transfer Steps

The process begins with selecting assets from the expiring fund. These are typically strong performers that still have growth potential. A third-party firm then provides an independent valuation based on:

• Financial performance
• Comparable transactions
• Current market conditions

This valuation establishes the price at which assets will transfer to the new vehicle. The Limited Partner Advisory Committee (LPAC) reviews the proposed transaction before it moves forward.

The transfer process usually takes 3-6 months from start to finish, depending on the complexity of the assets involved.

Rollover Options For Existing Limited Partners

When a continuation vehicle is formed, existing LPs have three main options:

• Full Sale: Sell their entire stake and receive immediate liquidity based on the agreed valuation.
• Full Rollover: Transfer their entire interest to the continuation vehicle and maintain exposure to the assets.
• Partial Liquidity: Sell a portion of their stake and roll the remainder into the new vehicle.

These options allow investors to match their participation to their own liquidity needs and investment goals.

New Capital And Fund Term Resets

The continuation vehicle typically brings in new investors who provide capital to fund the liquidity for selling LPs. These new investors are often secondary buyers looking for exposure to mature assets.

The economic terms are reset in the new vehicle. For example:

Term

Original Fund

Continuation Vehicle

Management Fee

1.5%–2.0% of invested capital

1.5%–2.0% of committed capital

Carried Interest

20% after preferred return

15%–20% with new hurdle rate

Fund Duration

10 years (typical)

3–5 years (initial term)

These terms are negotiated and disclosed to all participants before the transaction closes.

Benefits And Risks For GPs And LPs

Continuation vehicles create different benefits and risks for the various participants.

For GPs (fund managers), the main benefits include:

• More time to increase asset value
• New carried interest and management fee terms
• Ability to focus on high-conviction portfolio assets

The risks for GPs include potential conflicts of interest in selecting assets and setting prices, as well as reputational concerns if the transaction is viewed as unfair.

For LPs (investors), the benefits include:

• Flexibility to choose liquidity or continued investment
• Potential for additional upside in well-performing assets
• Ability to match investment timing to their own needs

The risks for LPs center around valuation concerns, reset fee structures, and uncertainty about future performance.

The alignment of interests between GPs and LPs is strongest when:

• Valuation processes are transparent
• Communication is clear and timely
• Governance structures provide appropriate oversight

Advanced Considerations For CV Deals

Asset Level Debt Strategies

Many assets in continuation vehicles have existing debt that needs to be addressed during the transfer. This debt may be:

• Kept in place with lender consent
• Refinanced to align with the new investment timeline
• Assumed by the new vehicle as part of the transaction

The approach to debt affects the overall structure and economics of the continuation vehicle. Lenders typically need to approve any transfer of collateralized assets, making them important stakeholders in the process.

Fund managers often engage with lenders early to discuss options and secure necessary approvals before finalizing the continuation vehicle.

Co-investment Approaches

Continuation vehicles sometimes include co-investment rights for existing LPs, employees, or new investors. These rights allow participants to invest directly alongside the main fund.

Co-investments in continuation vehicles can:

• Provide additional capital to support the transaction
• Increase alignment between managers and investors
• Create flexible structures for different participant needs

Digital platforms like Helm help manage these co-investment opportunities by streamlining subscription processes, tracking capital, and executing payments efficiently.

Regulatory Oversight Requirements

The Securities and Exchange Commission (SEC) has increased its focus on continuation vehicles to ensure investor protection. Key regulatory considerations include:

• Disclosure Requirements: Clear communication about asset valuations, conflicts of interest, and fee structures
• Fiduciary Duty: Meeting the standard of putting investor interests first
• Governance Practices: Appropriate involvement of the LPAC and independent advisors

Fund managers can address these requirements through transparent processes, documented decision-making, and consistent communication with all stakeholders.

Emerging Market Trends In Secondary Transactions

The continuation vehicle market continues to evolve, with several emerging trends shaping its future.

One notable development is the rise of "CVs on CVs" – secondary continuation vehicles that transfer assets from an existing CV into a new structure. This approach is used when additional time or capital is needed for the same assets.

Technology is playing a larger role in how these transactions are executed. Digital platforms now help manage:

• Investor communications
• Document delivery and tracking
• Capital calls and distributions
• Fund governance updates

The private market secondaries space reached approximately $120 billion in global volume in 2023, with continuation vehicles making up a significant portion of this activity.

Key trends include:

• Growth in sector-specific continuation vehicles
• Increased standardization of transaction terms
• Wider participation from different investor types
• Integration of technology to improve efficiency

These trends reflect the maturation of the continuation vehicle market as it becomes a standard tool for fund lifecycle management.

Strategies To Balance GP And LP Interests

Fair Valuation Methods

Establishing fair market value is critical to a successful continuation vehicle transaction. Best practices include:

• Using independent third-party valuations
• Obtaining fairness opinions from separate advisory firms
• Comparing multiple valuation methodologies
• Documenting the entire valuation process

Digital platforms can increase transparency by giving all stakeholders access to valuation documentation and transaction details in one secure location.

Transparent Fund Governance Structures

Effective governance helps align interests between GPs and LPs in continuation vehicle transactions. Key elements include:

• An active Limited Partner Advisory Committee (LPAC)
• Clear disclosure of potential conflicts
• Documented decision-making processes
• Regular communication with all investors

These governance structures help maintain trust and ensure that the transaction serves the interests of all participants.

Effective Capital Call Timing

Capital calls in continuation vehicles fund the liquidity option for selling LPs and support ongoing operations. Efficient capital movement depends on:

• Clear communication about timing and amounts
• Streamlined processes for collecting funds
• Transparent tracking of all transactions
• Prompt distribution to selling LPs

Modern payment platforms can accelerate this process by automating notifications, tracking responses, and confirming receipt of funds in real time.

Looking Ahead In Private Markets

Continuation vehicles are becoming a standard feature in private capital markets used across private equity, venture capital, real estate, and infrastructure. CVs now account for  1 in 10 Private Equity exits. Continuation vehicles will continue to surge in popularity as a strategy for extending investment timelines, providing liquidity options, and maximizing value creation in private assets. But the added flexibility comes with a hidden cost: operational complexity —dual-track workflows, tight timelines, fairness opinions, and sensitive LP decisions, all under increasing regulatory and reputational pressure.

Technology platforms like Helm continue to improve how these complex transactions are managed. Tools for data integration, real-time reporting, and automated workflows help fund managers maintain compliance while improving efficiency.

Helm, an iAltA company, powers the next generation of Continuation Vehicles with:

• Seamless LP elections (rollover or cash out)
• Fast entity formation with instant banking
• Reusable investor profiles and KYC
• Automated capital flows and payment tracking
• Immutable audit trail to support compliance and fairness

If you're structuring a continuation vehicle (or planning to), let us show you how Helm makes the process fast, clean, and frictionless for you and your LPs. Book a demo of the Helm platform here.

Frequently Asked Questions About Continuation Vehicles

How do continuation vehicles reset carried interest and management fees?

Continuation vehicles establish new economic terms when created, typically setting carried interest at 15-20% and management fees at 1.5-2% of committed capital. These adjustments apply from the start of the new vehicle and are agreed upon before the transaction closes.

What determines the fair market value of assets transferred to a continuation vehicle?

Fair market value in continuation vehicles is determined through independent third-party valuations based on financial data, recent comparable transactions, and current market conditions. Some transactions also use competitive bidding to establish market-based pricing.

How do digital platforms improve continuation vehicle transactions?

Digital platforms automate investor communications, capital calls, distributions, and document management for continuation vehicles. These tools provide real-time tracking and reporting while creating a secure, centralized system for all transaction activities.

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