Private equity continuation funds keep unsold assets tied up longer

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Private equity continuation funds

Highlights

Raymond James projects global continuation vehicle transactions to surpass $100 billion in 2025, rising from $63 billion in 2024 and $91 billion in 2025.
A Coller Capital survey shows 24% of institutional investors have experienced assets moving to a second continuation vehicle, with 38% expecting this within 12 months.
Investor liquidity pressures and growing distribution needs are prompting sales of continuation fund interests at discounts, while hopes for higher valuations delay exits.

Continuation vehicle use expands as exits stay weak

As reported by Financial Times, the growing use of so-called CV squared structures reflects a prolonged period in which private capital firms struggle to realise gains through IPOs or traditional sales. In these deals, assets already moved into one continuation vehicle are transferred again into another, giving existing investors the option to sell, roll over their stakes, or combine cash with continued ownership.

CapVest’s handling of drugmaker Curium illustrates the trend. The London-based buyout group first invested in Curium in 2016, moved the company into a continuation vehicle four years later during Covid-19 market turbulence instead of selling it, and in March this year shifted it into another continuation vehicle again.

The model is expanding quickly. Raymond James expects global continuation vehicle transactions to exceed $100 billion this year, up from $91 billion in 2025 and $63 billion in 2024. A Coller Capital survey found 24 per cent of institutional investors have already seen assets transferred into a second continuation vehicle, while 38 per cent expect this to happen over the next 12 months.

Investor liquidity pressures and valuation concerns intensify

Some investors with longer time horizons are accepting second continuation vehicles in the hope of securing higher eventual valuations and a cleaner exit later. But investors facing cash needs, redemption demands or distribution pressure are often less willing to wait through another multi-year hold, pushing some to sell in the secondary market at discounts to net asset value.

Bruce MacDonald, chief investment officer of the Virginia Commonwealth University Investment Management Company, says CV squared is "not a healthy sign" and warns it risks turning private equity into "a perpetual illiquidity machine" while obscuring mispriced assets. Jeff Akers, head of secondary investments at Adams Street Partners, also says it is dangerous to invest in continuation vehicles on the assumption that another one will be needed to exit.

Still, some market participants remain open to the structure if it preserves upside. Charles Aponso, a partner at Quilvest Capital Partners, expects to see quite a lot of such transactions ahead, while HarbourVest managing director Jeffrey Keay says hopes for a rebound in IPOs and acquisitions are abating after the U.S.-led war on Iran and amid rising investor redemption requests.

Our earlier report on Cerebras Systems’ record semiconductor IPO noted that stronger investor appetite for new tech listings was reviving expectations for a broader IPO rebound, with several large AI groups potentially preparing market debuts. It also highlighted that public markets can provide funding channels that many capital-hungry companies may struggle to access privately, suggesting IPOs could again become a meaningful exit and financing path if momentum holds.

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