GP-Led Continuation Funds: How to Structure Transactions That Satisfy Both Existing and New LPs

The secondary market hit a record $162 billion in 2024—a 45% year-over-year increase. Within this surge, GP-led transactions transformed from occasional restructuring tools into core liquidity strategies. Nearly 90% of continuation fund deals now involve GPs rolling 100% of available proceeds, signaling strong conviction in retained assets. For fund managers, understanding how to structure these transactions fairly for existing LPs while attracting new capital has become a critical competency.

The Rise of Continuation Funds as Mainstream Exit Strategy

Continuation vehicles consumed 13% of PE exit activity in 2024, up from just 5% in 2020-2021. According to Jefferies' estimates, CV deals accounted for nearly 19% of sponsor-backed exit volume in H1 2025. This rapid adoption reflects a fundamental shift in how GPs think about portfolio company timing and LP liquidity needs.

The traditional PE model assumed exits within fund life—typically 10 years plus extensions. But optimal exit timing rarely aligns with fund expiration. A high-performing asset requiring additional growth runway might reach optimal sale value in year 12 or 14, beyond typical fund extension limits. Selling early destroys value; holding indefinitely violates fund terms.

Continuation funds solve this timing mismatch. The GP transfers assets from the legacy fund to a new vehicle, giving existing LPs the option to cash out or roll their investment. New LPs provide fresh capital for liquidity and growth initiatives. The GP maintains management rights and the opportunity to compound returns on their best assets.

Single-Asset vs. Multi-Asset Structures

Single-Asset Continuation Vehicles

Single-asset CVs—continuation funds holding one portfolio company—represent approximately 48% of GP-led volume. These structures work best for trophy assets with clear value creation potential and strong buyer interest. The concentrated exposure simplifies valuation discussions and due diligence while maximizing GP focus on the specific opportunity.

SACF volumes jumped 54% in 2024 with 73 completed transactions. The structure particularly suits situations where the GP believes significant value remains but the asset is too large for the legacy fund's remaining capacity or time horizon. By isolating the asset, the GP can pursue an extended growth strategy without the constraints of the original fund structure.

Multi-Asset Structures

Multi-asset deals represented 47% of GP-led issuance in H1 2025 versus 32% in H1 2024, showing rapid growth. These structures transfer multiple portfolio companies to a single continuation vehicle, providing diversification for new investors and operational efficiency for GPs managing the transition.

Multi-asset CVs often address end-of-fund situations where several strong performers warrant extended holding periods. Rather than executing multiple single-asset transactions, the GP packages them together, reducing transaction costs and simplifying LP decision-making. The diversification also attracts secondary buyers who prefer portfolio exposure over concentrated bets.

Structuring Fair Transactions for Existing LPs

Valuation Process and Third-Party Validation

The most contentious aspect of continuation funds is valuation. The GP—who will remain the asset's manager—has inherent conflicts in pricing the transaction. Setting the price too low harms selling LPs; setting it too high disadvantages new investors and rolling LPs. Independent valuation from credible third parties provides essential validation.

Best practices include engaging multiple independent valuers, running competitive processes with secondary buyers, and providing comprehensive data rooms enabling informed LP decisions. LPs have grown sophisticated about continuation fund conflicts and expect rigorous processes that demonstrate fair pricing.

LP Election Mechanics

Existing LPs typically receive three options: cash out at the transaction price, roll into the continuation fund (often with fee concessions), or a combination of partial cash and partial roll. Election periods usually run 30-60 days, with detailed information packages supporting LP decision-making.

The quality of LP communication significantly impacts transaction success. GPs who provide clear rationales, detailed projections, and responsive Q&A processes see higher rollover rates than those who treat the election as a formality. LP sophistication means generic communications generate skepticism rather than confidence.

GP Economics Reset

Continuation funds typically reset GP economics—the GP earns new management fees and carried interest on the continuation vehicle. This creates another conflict: the GP benefits from extending the relationship regardless of whether extension serves LP interests. Addressing this conflict requires transparent communication about fee structures and performance thresholds.

Progressive GPs often accept modified economics for continuation funds: reduced management fees recognizing existing familiarity with the assets, higher performance hurdles reflecting the restarted carry calculation, and meaningful GP co-investment demonstrating alignment. These concessions signal that the continuation reflects conviction, not fee-seeking.

Attracting New LP Capital

What Secondary Buyers Evaluate

Dedicated secondary funds—which raised $115 billion in fresh capital in 2024—represent the primary source of new LP capital for continuation funds. These sophisticated buyers evaluate transaction quality through multiple lenses: GP track record and operational capability, asset quality and value creation potential, price reasonableness relative to comparables, and structure fairness including existing LP optionality.

Fundraising remained highly concentrated in 2024, with just five managers capturing nearly three-quarters of capital raised. These dominant players set market standards and possess significant leverage in negotiations. GPs seeking their capital must meet elevated diligence expectations.

Due Diligence Requirements

Secondary buyers conduct extensive due diligence rivaling original investment processes. They expect comprehensive data rooms including detailed portfolio company financials, historical performance versus plan, market position analysis, and forward projections with supporting assumptions. Gaps in documentation or delayed responses signal operational weaknesses that discount pricing.

The timeline pressure of continuation fund processes—often running 60-90 days from launch to close—requires GPs to prepare documentation proactively. Having organized, accessible data dramatically improves execution speed and pricing outcomes. Manual document compilation during the process creates delays that secondary buyers penalize.

Regional and Market Trends

North America generated 61% of global GP-led secondaries volume in H1 2025, according to Evercore. However, regional adoption is accelerating globally. More than half of APAC respondents and 51% of North American respondents plan to increase GP-led secondary dealmaking in the next 24 months. In EMEA, 43% plan increases compared to just 14% in 2024—a dramatic shift in regional sentiment.

This globalization means GPs must understand jurisdiction-specific considerations. European continuation funds face AIFMD implications; Asian transactions involve complex cross-border tax structuring; Latin American deals require local regulatory navigation. Multi-jurisdiction expertise becomes essential as the market expands beyond North American dominance.

Key Takeaways

Sources

• BlackRock (2025). FY2024 Secondary Market Recap and Outlook - $162 billion record transaction volume
• Jefferies (2025). Secondary Market Analysis - GP-led transactions at 19% of exit volume
• William Blair (2025). 2025 Secondary Market Report - Market dynamics and regional trends
• Evercore (2025). GP-Led Secondaries Analysis - Regional volume breakdown and adoption rates
• Dechert (2025). GP-led Secondaries and Continuation Vehicles Boost DPI and LP Liquidity