Executive Summary

GP-led continuation vehicles have evolved from a niche liquidity solution into an essential strategic tool for venture capital and private equity firms. This comprehensive guide provides actionable frameworks based on insights from Inovia Capital ($2.5 billion AUM), PJT Partners (global secondary advisory leader), and Proskauer Rose (Secondary's Law Firm of the Year), who have collectively executed billions in continuation vehicle transactions.

Key Statistics:

• Secondary market dry powder reached $315 billion in 2025, against $210 billion in expected annual volume

• Over 150 sponsors have now executed repeat continuation vehicle transactions

• GP-led transactions now match or exceed LP-led secondary volume in certain quarters

• Inovia Capital's continuation vehicle attracted $900 million in interest for a $334 million transaction

• Private credit secondary market volume is projected to nearly double from 2025 levels

• Well-prepared sponsors can execute continuation vehicles from launch to close in 90 days

What You'll Learn:

• The four pillars driving unprecedented capital formation in secondary markets

• How to structure single-asset versus multi-asset continuation vehicles for different strategic objectives

• The complete anatomy of a successful continuation vehicle using Inovia Capital's $334 million case study

• Legal considerations and fiduciary obligations when acting as both buyer and seller

• How to achieve 100% GP carry rollover alignment that secondary buyers expect

• Timeline and preparation requirements for efficient execution

What is a GP-Led Continuation Vehicle?

Definition: A GP-led continuation vehicle (CV) is a new fund structure created by a general partner to acquire select portfolio companies from one or more of their existing funds, providing liquidity to existing limited partners while allowing the GP to continue managing high-conviction assets for an extended period.

Key Characteristics:

• GP initiates the transaction rather than an LP seeking to sell their fund interest

• Existing LPs receive the option to cash out at fair market value or roll their investment into the new vehicle

• New institutional investors provide fresh capital to acquire the assets

• GP typically rolls 100% of crystallized carry plus existing capital account into the new vehicle

• Creates a new fund with fresh economics, governance, and investment period

• Typical hold period extension of 4-7 years beyond original fund life

How Continuation Vehicles Differ from Traditional Exits:

Quote from Chris Arsenault, Co-Founder and Partner, Inovia Capital: "A successful VC firm is basically built on three pillars: the ability of the GP to raise capital, the ability for the GP to create value, and the ability for the GP to monetize. The manufacturing of exits is basically part of that critical third pillar, and that allows a GP to raise another fund, continue to create value over time."

Why Continuation Vehicles Matter in 2026

The Liquidity Imperative

The venture capital and private equity industry faces a fundamental challenge: companies are staying private longer, fund lives are extending, and traditional exit pathways have become less predictable. Continuation vehicles address this structural shift by creating liquidity options that don't depend on IPO windows or M&A cycles.

Market Context:

• Private companies increasingly choose to remain private rather than pursue IPOs

• Average time to exit has extended significantly across venture and growth stages

• M&A activity remains below historical averages despite improving conditions

• LP demand for distributions (DPI) has intensified pressure on GPs to manufacture liquidity

Quote from Corey Dietrich, Partner, Proskauer Rose: "Not every private company was meant to be a public company. And when you think about that, and you think about the selection of what assets are being moved into continuation funds, having this narrative behind your fund is really, really important."

The Capital Formation Explosion

Secondary market capital formation has reached unprecedented levels, fundamentally changing the dynamics of GP-led transactions.

Current Market Size:

• Total secondary market dry powder: $315 billion

• Expected 2025 transaction volume: $210 billion

• Capital overhang ratio: Approximately 1.5 years of deployment capacity

• Year-over-year dry powder growth: Significant expansion from $100-200 billion range to $300+ billion

Quote from Danny Schuster, Managing Director, PJT Partners: "When you think about what's driving the increase in dry powder beyond just the addressable opportunity set from a volume standpoint, there are four key pillars. And two of them are expansions, two of them are extensions."

The Four Pillars of Capital Formation

Understanding where secondary capital originates helps GPs identify the right partners for their continuation vehicles.

Pillar 1: Flagship Fund Expansion

Established global secondary investors are raising significantly larger funds to capture the growing opportunity set. These well-known institutional secondary programs have track records spanning multiple market cycles and deep expertise in complex transactions.

Pillar 2: Private Wealth Channel Extension

Major secondary managers are extending their strategies into private wealth channels, bringing net new capital to the market. Secondaries are particularly suitable for private wealth investors because they offer:

• Mitigated J-curve effect (investing in existing assets rather than blind pool commitments)

• Immediate exposure to mature portfolio companies

• Shorter duration to potential liquidity events

• Diversification across vintages and managers

Pillar 3: New Products from Existing Sponsors

Traditional buyout sponsors and other alternative asset managers have recognized the opportunity to apply their skill sets to the GP-led market. These new entrants bring:

• Deep sector expertise and operational capabilities

• Existing LP relationships and distribution networks

• Complementary value-add services for portfolio companies

• Fresh perspectives on asset valuation and growth potential

Pillar 4: Traditional LP Expansion

Institutional LPs who historically only invested in primary funds are now allocating directly to secondary transactions. Importantly, many state pension plans and institutional investors have developed infrastructure to roll into continuation vehicles where they previously could not participate.

Quote from Danny Schuster: "A number of state plans in the U.S. have actually developed and announced the capability to respond to and roll into transactions where they previously couldn't. So when you think about the theme of readiness, that infrastructure development is really supporting market growth."

Single-Asset vs. Multi-Asset Continuation Vehicles

The choice between single-asset and multi-asset structures depends on strategic objectives, portfolio composition, and market conditions.

Single-Asset Continuation Vehicles

Definition: A continuation vehicle holding one portfolio company, typically a top performer with significant remaining upside potential.

Best Suited For:

• Crown jewel assets with clear growth trajectory

• Companies requiring significant follow-on capital for expansion

• Situations where specific investors want concentrated exposure to a particular company

• High-conviction assets where GP sees 3-5x additional return potential

Characteristics:

• Almost universally involves top-performing assets

• Often includes clear use of capital to support growth

• Attracts investors seeking concentrated exposure to specific opportunities

• May be driven by inbound investor interest (pull-driven)

• Typically commands valuations at or near recent financing rounds

Quote from Danny Schuster: "The single asset almost universally has to be around one of the top-performing assets in a portfolio, and the reason for doing it usually involves some form of growth that's ahead, often with clear use of capital to support that growth."

Multi-Asset Continuation Vehicles

Definition: A continuation vehicle holding multiple portfolio companies, typically from one or more funds, creating a diversified portfolio for new investors.

Best Suited For:

• End-of-life fund situations with multiple quality assets

• GPs seeking to provide broad-based exposure to new investors

• Situations requiring fund-level capitalization management

• New entrants to secondary investing seeking diversification

Characteristics:

• Solves fund lifecycle management challenges

• Provides diversification across companies, stages, and sectors

• Often involves assets from multiple vintage year funds

• Appeals to investors new to secondary markets

• May include mix of performance profiles across the portfolio

Quote from Chris Arsenault: "We see the multi-asset as an opportunity to continue to support these companies on a broader base and provide diversification to the partnering LPs that are providing the capital."

Comparative Framework

Quote from Corey Dietrich: "If you are new to the secondary market and you want broad-based exposure, a diversified asset class, not all of your eggs in one basket, I think there is a lot of attractiveness to the multi-asset continuation vehicle. It's your broad-based exposure to a pool of secondary assets."

Market Specialization and Buyer Landscape

The Evolution from Generalist to Specialist

The secondary market has matured from a generalist approach to increasingly specialized strategies, mirroring the evolution seen in primary markets over the past decade.

Emerging Specializations:

• Single-asset continuation vehicle specialists

• Multi-asset continuation vehicle focused funds

• LP trade specialists

• Tender offer specialists

• Sector-specific secondary funds (technology, healthcare, infrastructure)

• Asset class specialists (private credit secondaries, venture secondaries)

Quote from Corey Dietrich: "Maybe 5 or 10 years ago, secondary buyers looked at all secondary opportunities, whether it was infra, whether it was venture, whether it was buyout. I think what we're starting to see now as this market becomes more and more developed is secondary buyers with really niche classes of secondaries that they look into."

New Market Segments

The expansion of secondary strategies into new asset classes demonstrates the market's continued evolution.

Private Credit Secondaries:

• Market has emerged rapidly over the past 2-3 years

• Volume projected to nearly double from 2025 levels

• Almost universally structured as multi-asset vehicles

• Single-asset private credit CVs remain extremely rare

Venture Capital Secondaries:

• Specialized venture secondary funds have emerged

• AI and technology sectors driving particular interest

• Single-asset opportunities often investor-pull driven due to limited primary access

• Established GPs with strong track records command premium valuations

Quote from Chris Arsenault: "There's a lot of companies right now, especially in the AI space, because of everything that's been going on over the last few years, that many investors just can't get into the deal. The only way they can enter is through a collaboration with a GP in order to have access to capital by providing liquidity to earlier-stage investors."

Implications for GP Strategy

Understanding buyer specialization helps GPs:

• Target the right investors for their specific transaction type

• Time processes to align with buyer deployment cycles

• Structure transactions to appeal to their ideal investor profile

• Build relationships with specialists before transaction launch

Quote from Danny Schuster: "In any given quarter, you might see the pendulum swing between one part of the market versus the other in terms of where people are spending time. You have to be deep in conversation with each buyer to understand where they're spending time, because it does differ by quarter, depending on where each party is in their deployment cycle."

The Anatomy of a Successful Continuation Vehicle: Inovia Capital Case Study

Background and Context

Inovia Capital, a Canadian-headquartered full-stack VC firm with over $2.5 billion in active AUM plus $1.3 billion in GP/LP co-invest, executed a $334 million multi-asset continuation vehicle that attracted $900 million in investor interest—nearly 3x oversubscription.

Transaction Overview:

• Vehicle Size: $334 million

• Investor Interest: $900 million (2.7x oversubscribed)

• Number of Assets: 9 portfolio companies

• Source Funds: 3 funds across different vintages

• GP Investment: 150% of crystallized carry (4%+ ownership in CV)

• Timeline: Approximately 3 months from launch to close

Portfolio Construction Strategy

The Inovia team applied rigorous selection criteria to determine which assets belonged in the continuation vehicle.

Asset Selection Framework:

Tier 1: Anchor Asset (Fund 1 - Beyond End of Life)

• Single company representing approximately half of CV value

• Located in oldest fund that had exceeded its term

• Deep management team knowledge accumulated over years

• Company had experienced growth stall followed by recovery

• Clear 4-5 year path to generating target multiples

• Strong candidate due to end-of-life fund pressure

Tier 2: High-Potential Assets (Fund 2 - At End of Life)

• 4 of 10 remaining portfolio companies selected

• Fund had just passed 10-year mark

• Companies had received acquisition offers from third parties

• GP conviction that 2.5-3x additional returns achievable in near term

• Remaining 6 companies not selected for CV

Tier 3: Strip Transaction (Fund 3 - Not End of Life)

• 4 highly performing companies from active fund

• Could have been sold to third parties for DPI generation

• Included because GP would continue managing regardless

• All had recent or pending financing rounds (market pricing)

• Provided diversification and scale to the CV portfolio

Quote from Chris Arsenault: "From a GP perspective, we looked at all of these 9 assets, and we said, okay, if these 9 assets were in front of us, how much capital would we be investing in them, and what type of returns do we think we would be able to generate within what type of timeframe?"

The Investment Thesis Test

Inovia applied the same rigor to CV asset selection as they would to new investments.

Key Questions for Each Asset:

1. Would we invest in this company today at this valuation?

2. What is the realistic return potential over the next 4-5 years?

3. Do we have conviction in the management team's ability to execute?

4. Is there a clear value creation plan we can articulate to investors?

5. Does this asset complement the overall portfolio narrative?

Assets That Didn't Make the Cut:

The 6 companies from Fund 2 not included in the CV were handled separately:

• GP committed to finding exits or managing to conclusion within 2 years

• Assessment was that limited additional value could be generated

• These assets didn't meet the CV investment thesis threshold

• Transparent communication with LPs about different treatment

LP Communication Strategy

Inovia's approach to LP communication was a critical success factor, involving multiple touchpoints throughout the process.

Communication Timeline:

Phase 1: Pre-Process Notification

• Shared initial thoughts on CV structure with LPs before engaging advisors

• Explained rationale for considering continuation vehicle

• Gathered initial LP feedback on approach

Phase 2: Process Update

• Informed LPs of selected advisors and process timeline

• Outlined structure and asset selection

• Explained roll option for existing LPs

Phase 3: Term Sheet Notification

• Shared information about term sheets received

• Explained selection criteria for lead investors

• Provided update on expected timeline to close

Phase 4: Final Communication

• Confirmed selected investors and final terms

• Detailed roll versus cash election process

• Set expectations for closing and transition

Quote from Chris Arsenault: "I don't feel, or I don't think that the LPs felt that they were left in the dark. They were made aware before, they were made aware of the process, they were made aware of where we stood, they were made aware of the term sheets and the offers that we had received."

LPAC Navigation

With assets from three different funds, Inovia needed to navigate three separate LPAC approvals, each with a different business case.

Fund 1 LPAC (Beyond End of Life):

• Business case: This is the crown jewel, we want to continue rather than sell to third party

• Valuation justification: Market-based pricing

• LP benefit: Continued upside exposure or liquidity at fair value

Fund 2 LPAC (At End of Life):

• Business case: 4 assets moving to CV, 6 remaining assets to be exited within 2 years

• Message: Limited additional value expected from non-CV assets

• LP benefit: Clarity on fund wind-down timeline

Fund 3 LPAC (Active Fund):

• Business case: Selling strip to CV to generate DPI at good valuations

• All assets had recent financing rounds establishing market pricing

• LP benefit: DPI generation while maintaining exposure through roll option

Execution Excellence

Several factors contributed to the efficient 3-month execution timeline.

Preparation Elements:

• Cap tables and waterfalls already organized and current

• Marketing materials ready within 1-2 weeks of launch

• Management teams prepared with video recordings for data room

• Relationships with potential buyers pre-cultivated

• Legal documentation templates prepared in advance

Quote from Danny Schuster: "What made it so efficient and streamlined to go to market with a powerful message in your case was the preparedness on the cases. Going into the process, there was a very clear articulation of what is the portfolio that we're looking at, and you were far enough along in that process to make a quick decision."

Results and Outcomes

Transaction Metrics:

• 7 term sheets received from qualified buyers

• $900 million of interest for $334 million vehicle

• Pricing at market value (no discount to recent valuations)

• GP invested 150%+ of crystallized carry

• 3-month execution timeline from launch to close

Value Preservation:

During the 3-month process, 2 assets experienced valuation increases, requiring price adjustments. The efficient timeline minimized value leakage to the CV that would have occurred with a longer process.

Quote from Chris Arsenault: "We basically got the optimal price for existing investors, and we still believe that over time, we could generate better returns. That allowed us to attract 7 term sheets."

Legal Considerations and Fiduciary Obligations

The Dual Hat Challenge

In GP-led continuation vehicles, the sponsor occupies the unique position of being both buyer and seller, creating inherent conflicts that must be carefully managed.

The Conflict:

• As GP of the selling fund(s), fiduciary duty to maximize value for existing LPs

• As GP of the continuation vehicle, responsibility to new investors

• Personal financial interest through crystallized carry and go-forward economics

• Ongoing relationship with portfolio company management teams

Quote from Corey Dietrich: "In these GP-led continuation funds, your sponsor is both a buyer and a seller. And that is a conflicted transaction, there's no way around it. Your sponsor needs to make sure that it is fulfilling both its fiduciary obligations to the seller, as well as to the CV, which it ultimately will be in partnership with once the transaction closes."

Conflict Mitigation Tools

The market has developed numerous mechanisms to address conflicts and demonstrate arm's-length transaction conduct.

Process Validation:

• Fairness opinions from independent valuation firms

• Broad market canvassing through qualified advisors

• Competitive bidding process documentation

• Independent LPAC review and approval

• Third-party legal counsel for selling funds

Structural Protections:

• LP roll option at same terms as new investors

• Full disclosure of GP economics and conflicts

• Detailed investment committee materials and documentation

• Clear articulation of why transaction benefits all parties

Quote from Danny Schuster: "A question that you'll often get in an LPAC meeting is, tell me about the process. How many people did you go to? Did you canvas the whole market? Did you really unearth the best valuation? Working with an advisor helps that conversation. People want to know that there was a real arm's length process that was run."

GP Carry Rollover Requirements

Market convention has established clear expectations for GP economic alignment in continuation vehicles.

The Standard:

Active investment professionals must roll 100% of:

1. Crystallized carried interest from the transaction

2. Existing capital account in respect of assets being transferred

Rationale:

• Demonstrates GP conviction in go-forward thesis

• Addresses historical concerns about "zombie fund" creation

• Aligns GP and LP interests for the new vehicle's success

• Validates that GP believes additional value creation is achievable

Quote from Corey Dietrich: "If you are a GP in a continuation fund, the expectation is that your active investment professionals will roll 100% of the crystallized carry generated in the transaction. What that really boils down to is, if you're an active investment professional for the fund, your chips need to stay on the table."

Investor Considerations

Secondary buyers evaluating continuation vehicles assess several key factors related to conflicts and governance.

Buyer Due Diligence Focus:

• Team track record and experience in the asset sector

• Asset performance and growth trajectory

• GP commitment and alignment (carry rollover, additional investment)

• LP perception and likely roll rate

• Process integrity and valuation support

Quote from Danny Schuster: "What buyers are focused on always comes down to team, assets, alignment. Do they have a track record in the space that the assets are in? Have the assets performed? What are the growth factors? What's the team's commitment to the go-forward?"

Building Continuation Vehicle Readiness

The Strategic Imperative

Continuation vehicles have evolved from opportunistic transactions to strategic planning tools that require advance preparation.

Why Readiness Matters:

• Over 150 sponsors are now repeat CV issuers

• Market windows can open and close quickly

• Preparation enables faster execution when opportunities arise

• Infrastructure investment creates competitive advantage

• Readiness forces discipline in portfolio monitoring

Quote from Danny Schuster: "Having that in your toolkit going forward gives you a competitive advantage. When you think about, am I ready to take advantage of market conditions to match what's happening in my portfolio?"

The Forcing Function Benefit

Preparing for potential continuation vehicles creates positive secondary effects on fund management.

Operational Benefits:

• Forces detailed tracking of portfolio company performance

• Requires current cap tables and waterfall models

• Drives regular assessment of exit alternatives

• Improves LP communication and relationship management

• Creates documentation that serves multiple purposes

Quote from Chris Arsenault: "Readiness is also a forcing mechanism to be on top of the deals, being on top of your companies. The process itself, if it's to be efficient, you basically have to understand all of the aspects of what's going on with the company, otherwise the transaction will not come together, or it's going to take too much time."

Preparation Checklist

Financial and Legal Readiness:

Portfolio Assessment:

Marketing Preparation:

Relationship Development:

Timeline Considerations

Well-prepared sponsors can execute significantly faster than those starting from scratch.

Typical Timeline (Prepared Sponsor):

• Weeks 1-2: Final asset selection and advisor engagement

• Weeks 3-4: Marketing materials finalization and initial outreach

• Weeks 5-8: First round bids and buyer meetings

• Weeks 9-12: Final bids, negotiation, and documentation

• Weeks 13-16: LPAC approval, signing, and closing

Timeline Factors:

• Multi-asset transactions generally require more time than single-asset

• Cross-fund transactions add complexity and LPAC requirements

• Valuation changes during process may require price adjustments

• LP roll elections require adequate communication time

Quote from Corey Dietrich: "It doesn't really do you any good as a sponsor if you get 100% of NAV on the purchase price as of 6.30, and it takes you until 9.30 the following year to close, because any value accretion in the portfolio companies during that window accrues to the benefit of the CV."

The Role of Advisors

Why Advisors Matter

The complexity of continuation vehicles and the inherent conflicts involved make experienced advisors essential for successful execution.

Advisory Value Proposition:

• Market knowledge of buyer preferences and deployment cycles

• Process credibility for LPAC and investor validation

• Documentation efficiency through established templates

• Negotiation expertise on terms and economics

• Relationship access to broad buyer universe

Quote from Danny Schuster: "We're working with a firm that's a serial issuer of CVs. Their ability to get to market really quickly and really focus on how we're going to manage distribution in this process to get to the right outcome, as opposed to how we're going to get our ducks in a row on legals and getting IR coordinated with counsel, that is a huge competitive advantage."

Selecting the Right Partners

Financial Advisor Considerations:

• Track record in your asset class (venture, growth, buyout)

• Depth of secondary buyer relationships

• Experience with your transaction type (single vs. multi-asset)

• Team bandwidth and attention commitment

• Geographic coverage aligned with target buyers

Legal Counsel Considerations:

• Secondary transaction specialization

• Experience with GP-led structures specifically

• Knowledge of market standard terms

• Ability to move quickly on documentation

• Relationship with likely buyer counsel

Quote from Chris Arsenault: "I learned market standards are not necessarily market standard. They're often specific LP standards. They just brand it as a market standard. Without the right advisors around the GP to do this type of transaction, it can just delay and become more problematic."

LP-Led Secondaries: The GP Perspective

While this guide focuses on GP-led transactions, GPs must also be prepared to respond to LP-initiated secondary sales.

GP Responsibilities in LP-Led Transactions

When an LP seeks to sell their fund interest, the GP plays a critical role in the process.

Key GP Considerations:

• Consent rights over incoming investors

• Information provision to potential buyers

• Relationship continuity with selling LP

• Cap table management and concentration limits

• Alignment of new LP with fund strategy

Quote from Chris Arsenault: "When it's LP-led, where an LP needs liquidity and is going to be selling a sleeve of their commitments into funds or a whole commitment into a fund, the GP also has to be prepared. Not only because there's an engagement with the advisors and with that LP in order to see that transaction come to bear, but there are certain LPs that we turn down in fundraising, and we don't want an LP to appear under our cap table if it's not the LP with whom we want to build a long-term relationship."

Checks and Balances

The market has developed informal and formal mechanisms to ensure GP-led and LP-led transactions serve all stakeholders appropriately.

LP-Led Transaction Controls:

• LP initiates but cannot complete without GP consent

• GP can influence or approve incoming investor selection

• Transfer restrictions in fund documents provide framework

• GP maintains information rights and ongoing relationship

GP-Led Transaction Controls:

• GP initiates but requires LPAC approval

• Fairness opinions validate valuation

• LP roll option ensures liquidity is voluntary

• Process documentation demonstrates arm's length conduct

Quote from Corey Dietrich: "While you might be the one driving that process, you are not the one that ultimately gets to determine whether that process is successful. You need the general partner to bless that transaction for you. The same thing is true on the other side. A few years ago, people thought these transactions might appear a little coercive, but this market has really developed to address those concerns."

The Future of Continuation Vehicles

Market Evolution Trajectory

The continuation vehicle market continues to evolve in sophistication and scale.

Expected Developments:

• Continued specialization among secondary buyers

• Expansion into new asset classes (private credit, infrastructure, real assets)

• Increased institutional infrastructure for CV participation

• More standardization of terms and documentation

• Growing acceptance as routine portfolio management tool

Integration into Fund Strategy

Forward-thinking GPs are incorporating continuation vehicles into their strategic planning from fund inception.

Strategic Planning Elements:

• Fund document provisions that facilitate future CVs

• LP education on CV mechanics during fundraising

• Regular portfolio assessment for CV candidates

• Relationship building with secondary market participants

• Documentation practices that support efficient execution

Quote from Chris Arsenault: "The increase in capital is also creating a more liquid market for what has been considered for many decades an illiquid market. With the number of dollars going into secondaries, it allows optionality for a lot of companies to not go IPO right away, or for GPs not to have to wait for a sale of a company."

Frequently Asked Questions (FAQs)

General Continuation Vehicle Questions

Q: What is a GP-led continuation vehicle?

A: A GP-led continuation vehicle is a new fund structure created by a general partner to acquire select portfolio companies from their existing funds. The transaction provides liquidity to existing LPs who wish to exit while allowing the GP to continue managing high-conviction assets with a fresh investment period, new economics, and often new institutional investors alongside rolling LPs.

Q: How is a continuation vehicle different from a traditional secondary sale?

A: In a traditional LP secondary sale, an LP sells their fund interest to a buyer, with the GP continuing to manage the fund under existing terms. In a GP-led continuation vehicle, the GP creates a new vehicle, transfers select assets to it, and establishes new fund terms. The GP drives the timing and structure, and existing LPs choose to receive cash or roll their investment.

Q: What is the typical size range for continuation vehicles?

A: Continuation vehicles range significantly in size based on the assets involved. Single-asset vehicles may range from $50 million to several hundred million dollars. Multi-asset vehicles can range from $200 million to over $1 billion. Inovia Capital's multi-asset CV was $334 million, and the market has seen billion-dollar transactions become more common.

Q: How long does it take to execute a continuation vehicle?

A: For well-prepared sponsors, the timeline from launch to close is typically 3-4 months. Factors affecting timeline include transaction complexity (single vs. multi-asset, number of source funds), market conditions, buyer diligence requirements, and LPAC approval processes. The Inovia transaction closed in approximately 3 months.

Structural and Economic Questions

Q: What is the difference between single-asset and multi-asset continuation vehicles?

A: Single-asset CVs hold one portfolio company and are typically used for top performers with significant remaining upside. Multi-asset CVs hold multiple companies and are often used for end-of-life fund situations or to provide diversified exposure. Single-asset transactions are generally simpler structurally, while multi-asset transactions solve broader fund management objectives.

Q: How much of their carry do GPs typically roll into continuation vehicles?

A: Market convention requires active investment professionals to roll 100% of crystallized carried interest plus their existing capital account related to the transferring assets. This demonstrates GP conviction in the go-forward thesis. In the Inovia case, the GP invested 150% of crystallized carry, resulting in 4%+ ownership in the CV.

Q: What valuation do continuation vehicles typically transact at?

A: Well-structured continuation vehicles typically transact at or near recent financing valuations or fair market value. The Inovia transaction was priced at market value with no discount. Factors affecting valuation include asset quality, growth trajectory, recent comparable transactions, and buyer competition levels.

Q: What happens to LPs who don't want to participate in the continuation vehicle?

A: Existing LPs receive the option to either roll their pro-rata share into the new vehicle or receive cash for their portion of the transferred assets. This election ensures liquidity is voluntary and addresses potential concerns about coercion. Well-structured transactions provide adequate time for LPs to evaluate their options.

Process and Execution Questions

Q: Do I need an advisor for a continuation vehicle?

A: While not legally required, experienced advisors significantly improve outcomes. Financial advisors provide market knowledge, buyer relationships, and process credibility that validates arm's length conduct. Legal counsel with CV specialization ensures documentation efficiency and protection of GP interests. Advisor involvement helps demonstrate proper process to LPACs and investors.

Q: What role does the LPAC play in continuation vehicles?

A: The LPAC (Limited Partner Advisory Committee) typically must approve GP-led continuation vehicles as they involve conflicts of interest. LPACs evaluate the transaction rationale, pricing fairness, process integrity, and GP alignment. For multi-fund transactions, multiple LPACs may need to approve the same deal.

Q: How do fairness opinions work in continuation vehicles?

A: Fairness opinions from independent valuation firms validate that transaction pricing is fair to existing LPs. They address the inherent conflict of the GP being both buyer and seller. While not legally mandated, fairness opinions have become common practice and strengthen LPAC approval processes.

Q: What happens if asset values change during the transaction process?

A: Significant valuation changes during execution may require price adjustments. In the Inovia transaction, two assets increased in value during the 3-month process, requiring price adjustments with the buyers. This is one reason efficient execution timelines are valuable—they minimize value leakage or adjustment requirements.

Investor and Relationship Questions

Q: What types of investors participate in continuation vehicles?

A: The investor base includes dedicated secondary funds (both established and new entrants), traditional LPs expanding into secondaries, private wealth channels accessing through institutional platforms, primary-oriented investors seeking relationship-building opportunities, and existing fund LPs rolling their positions.

Q: How do continuation vehicles affect GP relationships with existing LPs?

A: When executed properly with transparent communication, continuation vehicles can strengthen LP relationships by demonstrating active portfolio management and providing liquidity options. Poor communication or process can damage relationships. The Inovia approach involved multiple touchpoints with LPs throughout the process.

Q: Can existing LPs increase their exposure through continuation vehicles?

A: Yes, existing LPs can typically choose to roll their pro-rata share or, in some cases, increase their commitment if capacity allows. This provides LPs who believe in the go-forward thesis the opportunity to maintain or increase exposure at validated valuations.

Q: How do secondary buyers evaluate continuation vehicle opportunities?

A: Secondary buyers focus on team track record, asset quality and performance, GP alignment and commitment, growth trajectory and value creation plan, process integrity and valuation support, and LP perception of the transaction. They also assess execution risk, including likely LP roll rates and regulatory considerations.

Strategic Questions

Q: When should a GP consider a continuation vehicle versus a traditional exit?

A: Continuation vehicles are appropriate when: the GP has high conviction in significant remaining upside; traditional exit paths are suboptimal or unavailable; fund lifecycle pressures require liquidity; the GP wants to maintain involvement with the company; and attractive secondary market conditions exist. Traditional exits may be preferable when maximum valuation is achievable through M&A or IPO.

Q: How should GPs think about the "CV candidates" in their portfolio?

A: GPs should regularly assess which portfolio companies might be CV candidates by evaluating: remaining upside potential at current valuations; time horizon required to achieve target returns; management team quality and GP relationship; company fit with secondary market investor preferences; and fund lifecycle timing. This assessment should be ongoing, not only when a CV is being considered.

Q: What preparation should GPs undertake before they need a continuation vehicle?

A: Advance preparation includes: maintaining current cap tables and waterfall models; developing secondary market relationships; building relationships with experienced counsel; documenting investment theses for key assets; establishing LP communication protocols; and reviewing fund documents for CV-related provisions. This preparation enables faster execution when opportunities arise.

Glossary of Terms

Carried Interest (Carry): Performance-based compensation paid to general partners, typically 20% of profits above a hurdle rate. In continuation vehicles, crystallized carry from the transaction is typically rolled into the new vehicle.

Continuation Vehicle (CV): A new fund structure created by a GP to acquire assets from existing funds, providing liquidity to existing LPs while allowing continued GP management.

Dry Powder: Committed but undeployed capital available for investment. Secondary market dry powder of $315 billion indicates significant capital seeking transaction opportunities.

GP-Led Transaction: A secondary market transaction initiated and structured by the general partner, as opposed to an LP seeking to sell their interest.

J-Curve: The pattern of early negative returns in private equity funds before investments mature and generate positive returns. Secondaries can mitigate this by investing in existing assets.

LPAC (Limited Partner Advisory Committee): A committee of LP representatives that advises the GP and must approve certain transactions involving conflicts of interest.

LP-Led Transaction: A secondary market transaction initiated by a limited partner seeking to sell their fund interest to a third party.

Multi-Asset CV: A continuation vehicle containing multiple portfolio companies, often from one or more source funds.

NAV (Net Asset Value): The current fair value of fund assets minus liabilities. CV transactions are typically priced relative to NAV.

Roll Option: The choice given to existing LPs in a continuation vehicle to either receive cash or transfer their interest to the new vehicle.

Secondary Market: The market for buying and selling existing interests in private equity and venture capital funds, as opposed to the primary market for new fund commitments.

Single-Asset CV: A continuation vehicle containing one portfolio company, typically a top performer with significant remaining upside.

SPV (Special Purpose Vehicle): A legal entity created for a specific purpose, often used to aggregate investor capital for specific transactions.

Strip Transaction: A partial sale of interests across multiple portfolio companies from a single fund, as opposed to a full fund interest sale.

Conclusion

GP-led continuation vehicles have transformed from a niche secondary market product into an essential tool in the modern private equity and venture capital toolkit. With $315 billion in secondary market dry powder and over 150 sponsors executing repeat transactions, continuation vehicles have earned their place as a mainstream portfolio management strategy.

Key Takeaways:

1. Preparation Creates Advantage: GPs who invest in readiness can execute faster, achieve better outcomes, and respond to market opportunities. The Inovia case demonstrates how preparation enabled a 3-month execution timeline.

2. Alignment is Non-Negotiable: Market convention requires 100% carry rollover from active professionals. This alignment demonstrates conviction and addresses historical concerns about GP motivations.

3. Communication Drives Success: Transparent, multi-stage LP communication throughout the process builds trust and facilitates smoother LPAC approvals. Keeping LPs informed is not just best practice—it's essential for relationship preservation.

4. Specialization is Increasing: The secondary market is evolving from generalist to specialist approaches. Understanding buyer preferences and deployment cycles helps GPs target the right partners.

5. Conflicts Can Be Managed: While inherent conflicts exist in GP-led transactions, the market has developed robust mechanisms—fairness opinions, process documentation, roll options—to demonstrate arm's length conduct.

Quote from Chris Arsenault: "The preparedness allowed us to really be on top of these companies in the sense that we were looking at all of these companies also as a new investment from a GP. We basically got the optimal price for existing investors, and we still believe that over time, we could generate better returns."

The GPs who master continuation vehicle execution today will have a significant competitive advantage in managing portfolio liquidity, LP relationships, and fund lifecycle transitions for years to come.

About Vessel

Vessel is the leading fundraising and investor relations platform for GPs globally. Our technology helps venture capital and private equity firms manage LP relationships, streamline fundraising processes, and execute complex transactions including continuation vehicles with efficiency and transparency.

Learn how Vessel can help you prepare for your next continuation vehicle: Contact our team for a demo

Additional Resources

Industry Research:

• PJT Partners: Secondary Market Insights and Analysis

• Preqin: Private Capital Quarterly Review

• Pitchbook: Global PE & VC Fund Performance Benchmarks

• Secondaries Investor: Annual Market Survey

Legal and Regulatory:

• Proskauer Rose: GP-Led Transaction Best Practices

• ILPA (Institutional Limited Partners Association): Secondary Transaction Guidelines

• SEC: Investment Adviser Considerations for Continuation Funds

Vessel Resources:

• Webinar: Applying Public Markets Best Practices to LP Communication

• Webinar: How to Build a High-Performing GTM Engine for Fundraising and Investor Relations