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Private Equity Secondary Markets: A Deeper Look at Continuation Funds


The private equity landscape has witnessed a transformation with the emergence of the secondaries market and continuation funds, providing new avenues for liquidity and investment strategies. This month, we’re going to dive deeper into the historical context, market trends, benefits, challenges, regulatory considerations, and the process of raising continuation funds in private equity transactions and why you should be paying attention to the strategy.

Historical Context:

The secondaries market initially catered to distressed sellers seeking exits from long-term, difficult-to-exit positions. However, it has evolved into a dynamic marketplace, offering opportunities for General Partners (GPs) and Limited Partners (LPs) to engage in alternative exit strategies amid market volatility.

Market Trends:

Continuation funds have gained traction as a preferred option for GPs and LPs, providing flexibility in managing portfolio companies and extending investment horizons. In 2020, PitchBook revealed a substantial $96.6 billion raised for new secondary funds. Among the key players were Ardian and HarbourVest Partners, raising funds of $19 billion and $14 billion, respectively. Additionally, total secondary deal volume hit an impressive $132 billion, surpassing the previous record of $88 billion set in 2019. Notably, continuation funds dominated GP-led secondary transactions, comprising 84% of the total $68 billion transacted during the year. This reflects a shift towards more active portfolio management strategies.

Benefits of Continuation Funds:

Continuation funds offer various benefits, including liquidity for existing investors, continued investment in high-performing assets, and access to experienced sponsors. These funds enable LPs to optimize portfolio allocations, while providing GPs with opportunities to capitalize on market opportunities and align interests through tailored fee structures.

Challenges and Regulatory Considerations:

Despite their benefits, continuation funds may face challenges such as regulatory scrutiny. Regulatory requirements, particularly those set by the SEC, mandate disclosures and fairness opinions in adviser-led secondary transactions.

Raising a Continuation Fund:

Raising a continuation fund involves several steps, including identifying suitable portfolio companies, assessing investor interest, structuring the fund, and obtaining necessary approvals. GPs typically engage in extensive due diligence to select portfolio companies with potential for continued growth and value creation. Investor outreach and marketing efforts are crucial in gauging investor appetite and securing commitments for the fund. Structuring the fund involves determining terms, economics, and governance arrangements that align with the interests of both GPs and investors. Obtaining approvals may involve seeking consent from existing LPs, regulatory compliance, and adhering to industry best practices.


The rise of continuation funds marks a significant evolution in the private equity landscape, offering new avenues for liquidity and investment strategies. These funds are poised to considerably impact private equity strategies, facilitating higher returns and liquidity options beyond traditional fund constraints. As the market continues to evolve, continued innovation and regulatory compliance will be crucial for sustaining growth and maximizing value for all stakeholders. We encourage you to reach out if you’d like to discuss how a sale leaseback could add incremental value to your portfolio companies as you consider liquidity solutions for your portfolio companies.


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