Private equity is no stranger to innovation, and over the past few years, one of its most significant structural shifts has been the rise of continuation funds. Once considered a niche tool for extending the life of underperforming assets, continuation funds have now cemented themselves as a core strategy in managing liquidity and maximizing returns.
With $152 billion in secondaries market transactions in 2024, and GP-led deals comprising $72 billion—a 50.4% jump from 2023—continuation funds are no longer a back-office solution; they are a defining feature of modern private equity. Their impact is not just theoretical. The numbers tell a story of capital moving differently, investor behavior shifting, and private equity firms adjusting their playbook.
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Why This Matters: The Liquidity Crunch in Private Equity
To understand the rise of continuation funds, you have to look at the liquidity crisis that has rippled through private capital markets.
- Limited Exit Options: The traditional private equity model relies on selling assets through IPOs, strategic sales, or secondary buyouts. But with capital markets tightening post-2022, IPO windows have been inconsistent, and exit multiples have been unpredictable.
- LP Liquidity Needs: Many Limited Partners (LPs), including pension funds and institutional investors, have faced constraints in their allocations. They need liquidity, and they need it faster than traditional private equity cycles allow.
- Rate Hikes and Valuations: Interest rate hikes starting in 2022 have reshaped valuations across asset classes. LPs are reassessing their commitments, and GPs (General Partners) are forced to find new ways to maintain their portfolios without relying on conventional exits.
Continuation funds have emerged as the go-to solution to address these pressures.
The Numbers: A Market Reshaped by Continuation Funds
- 65 continuation funds closed in 2024, surpassing the previous record of 57 in 2023.
- $36 billion raised in 2024—nearing the 2021 record of $38 billion—showing that despite concerns over economic conditions, investors are still deploying capital.
- The number of GPs using continuation funds for the first time surged in 2024, with 34 new managers in North America and 20 in Europe entering the space.
- Single-asset continuation funds now outnumber multi-asset vehicles for the first time. In 2021, 71% of continuation funds were multi-asset, but in 2024, single-asset vehicles took the lead.
Why GPs and LPs Are Buying In
The private equity industry is fundamentally built on relationships between GPs, who manage the funds, and LPs, who invest in them. When economic conditions shift, those relationships are tested. Continuation funds have become a tool to balance competing interests.
For LPs: Faster Liquidity, Better Terms
- LPs in older funds often need liquidity years before a GP is ready to exit an investment. Instead of waiting, they can sell their position into a continuation fund, securing an exit at a market-driven valuation.
- Continuation funds allow LPs to cash out or roll over into the new structure. This flexibility has been key in maintaining investor confidence during uncertain times.
For GPs: Holding on to Their Best Assets
- High-performing assets don’t always align with fund timelines. A fund nearing its expiration might hold a company that still has 3-5 years of strong growth potential. Selling too early would mean leaving money on the table.
- Instead of a traditional exit, GPs can move the asset into a continuation fund, keeping control while still generating returns for investors.
- Carry crystallization: GPs lock in performance fees (carry) on the deemed exit, providing an incentive to use this structure more frequently.
For Secondary Investors: Access to Quality Deals
- The secondary market has evolved. Investors now recognize that continuation funds aren’t just dumping grounds for weak assets but are often vehicles for high-performing businesses that need more time to compound returns.
- Large secondary investors, including pension funds and asset managers, are actively allocating capital to these funds.
Who’s Leading the Charge? The Biggest Players in Continuation Funds
When it comes to raising capital for continuation funds, a few names stand out. According to Preqin Pro, the top firms in the space include:
Firm | No. of Funds Closed | Aggregate Capital Raised ($bn) |
Clearlake Capital Group | 5 | 8.0 |
Hellman & Friedman | 2 | 5.0 |
Leonard Green & Partners | 3 | 4.7 |
Insight Partners | 3 | 4.3 |
Alpine Investors | 3 | 4.3 |
Clayton Dubilier & Rice | 1 | 4.0 |
On the single-asset side, some of the biggest transactions include:
Fund Name | Final Close Size ($bn) | Firm | Year |
CD&R Value Building Partners I | 4.0 | Clayton Dubilier & Rice | 2021 |
GIP Gatwick Airport Continuation Fund | 3.9 | Global Infrastructure Partners | 2019 |
Alpine Investors Apex CV | 3.4 | Alpine Investors | 2023 |
What’s Next? The Future of Continuation Funds in 2025 and Beyond
With interest rates expected to ease in 2025, some might assume that continuation funds will slow down. But the data suggests otherwise:
- Continuation funds shorten the path to liquidity. In traditional private equity, investors wait 7-10 years for exits. Continuation funds cut that down to 3-5 years, making them attractive even in a better exit environment.
- New entrants are coming in. Retail investors, large pension funds, and sovereign wealth funds are looking for alternative ways to allocate capital, and continuation funds offer high-quality assets at scale.
- More repeat usage. In 2024, many first-time GPs used continuation funds—and as familiarity grows, these funds are likely to become an embedded part of portfolio management.
The Bottom Line
Continuation funds are no longer an experimental tool; they are a permanent fixture in private equity. They provide liquidity in a market short on exits, flexibility for LPs, and longer holding periods for top-performing assets. The record-breaking $152 billion secondaries market in 2024 is a testament to their growth, and as more capital flows in, more firms will adapt this strategy.
For investors, the message is clear: continuation funds aren’t just about holding on to assets longer—they’re about managing capital better, securing liquidity faster, and maximizing returns in a changing financial world.