Continuation Fund: LP Elections, Pricing and the Next Fund

A continuation fund (also known as a continuation vehicle) is a new fund a private equity manager sets up to buy one or more portfolio companies from one of its older funds. Existing LPs choose to sell their share for cash or roll it into the new vehicle, and new secondary investors fund the purchase.

This piece is for GPs of low and mid-market funds weighing one within 12 to 24 months of their next raise, and for the LPs who face the sell-or-roll election.

These vehicles now compete for the same commitments as the GP's next fund: they took 12.4% of direct private equity fundraising in 2025, up from 1.2% in 2018, according to Preqin's 2026 data. The LPs who sell or roll in that election are the LPs your next fund will ask.

spectup works as a private placement agent for GPs raising $50M or more, on a continuation vehicle, on the next primary fund or on both, and only on the GP's side.

How does a continuation fund work?

A continuation fund transaction is a GP-led secondary built around three parties. The GP manages seller and buyer, an advisor or placement agent works for the GP, and a lead investor prices the deal for its own account.

These vehicles are what Morgan Lewis now calls a recurring portfolio management tool for GP-led secondaries. They run in six steps, and each one narrows what LPs can still influence:

1. Asset selection. The GP picks one or more companies in an older fund, usually near the end of its term, that it believes have further value to create.

2. Advisor and lead investor. The GP's advisor finds a lead investor, the secondary fund that sets the price and key terms.

3. Syndication. Other secondary funds and institutions join the lead to fund the full purchase.

4. LPAC review. The LPAC (the old fund's LP advisory committee) reviews the conflict and usually must consent, because the GP is on both sides of the price.

5. LP election. Each LP sells its share for cash at the agreed price or rolls into the new vehicle. Some deals add a status quo option, which lets an LP keep its existing terms.

6. Closing. The vehicle buys the assets, sellers are paid, and rollers and new investors hold the new terms.

Continuation fund vs LP-led secondary and other GP-led deals

The difference that matters is who starts the sale and who else has to respond. In an LP-led deal, one investor sells its interest in a whole fund and the other LPs aren't affected.

In a GP-led secondary, the GP starts the sale and every LP in the fund has to decide, which is why the two halves of the market for private equity secondaries carry different governance.

4 columns. Drag the table sideways; the first column stays put.

Single-asset and multi-asset continuation funds

Single assets now take the larger share: single-asset vehicles raised $40.2bn in 2025 against $34.8bn for multi-asset ones, by Preqin's count. For an LP, the single-asset version is the harder election, because the buyer has done more diligence on that one company than most LPs ever will.

What are private credit continuation vehicles? The same structure applied to a credit fund: the manager moves a portfolio of loans into a new vehicle, and LPs sell or roll. Kirkland & Ellis notes that multi-asset vehicles are standard in credit, infrastructure and real estate, where tax and currency mechanics change valuation, elections and the waterfall.

Tender offers, strip sales and NAV facilities

Three other GP-led tools reach a similar end without a new vehicle:

• Tender offer. A buyer offers to buy LP interests in the existing fund at a set price, and the fund carries on. Paired with a commitment to the GP's next fund, it's known as a stapled secondary.

• Strip sale. The fund sells a fixed slice of several positions and keeps control of the companies.

• NAV facility. The fund borrows against its portfolio instead of selling, which adds borrowing at fund level and draws LP scrutiny.

ILPA, the Institutional Limited Partners Association, asks GPs in its draft continuation vehicle guidance for a stronger evidenced commercial rationale, and already asks them to take the LPAC through the alternatives. Expect the LPAC to ask why the vehicle beat these three tools and a straight sale to a third party.

How large is the GP-led secondary market?

Many of the institutions that fund secondary buyers also commit to primary funds, which is why the size of this market matters to a GP's next raise.

GP-led continuation fund volume reached a record of more than $100 billion in 2025, according to Houlihan Lokey's 2025 Continuation Fund Study, carried by new buy-side capital and by single-asset and multi-asset vehicles from new and repeat GPs.

Preqin counted 123 continuation funds closed globally in 2025, up from 13 in 2018, with aggregate capital raised of $75.0bn, 12.4% of all direct private equity fundraising that year, in the same 2026 analysis. The two figures measure different things: Houlihan Lokey counts the market's transaction volume, Preqin counts the capital raised by the continuation funds that closed in the year.

Why GPs use continuation funds

Four motives drive most launches. The first two are about the asset, the last two are about the fund:

• More time for the best assets. A company still compounding at the end of its fund's term can be held instead of sold on the fund's calendar.

• Fresh capital. The new vehicle can carry money for add-ons the old fund no longer has.

• Liquidity for LPs. LPs who want cash get it without waiting for an M&A or IPO exit.

• Crystallising carry. The sale can produce carried interest on the old fund, and buyers commonly require the GP to reinvest all or a significant portion of it, as Kirkland's review of ILPA's draft notes.

A fifth motive sits behind many of them: DPI (distributions to paid-in capital, the cash an LP has received back). Continuation vehicles are estimated to make up at least a fifth of private market distributions in 2026, Morgan Lewis notes.

I'd be careful with that motive. A vehicle launched mainly to lift DPI before a fundraise will be read that way by the LPs it's meant to impress.

Who sets a continuation fund price, and how an LPAC tests it

The GP is selling to a vehicle it'll manage, so every LP's first question is whether the number would have survived a real market.

The lead investor sets the price after its own diligence, usually as a percentage of the latest NAV, the fund's own mark. In the sample behind Houlihan Lokey's 2025 study, most continuation funds priced at 90% of NAV or above, the 2025 median reached 97.0%, and 49% priced at or above NAV, up from 35% in 2023.

ILPA's 2026 draft wants targeted processes across broad buyer sets. Kirkland pushes back: bidder pools are not always broad, and it argues for reasonable price discovery directed at a fair, executable outcome.

The lead sets the price rather than the GP because the GP sits on both sides of the trade, and a number set by the party putting fresh capital in is the closest thing to an arm's-length price the structure allows.

Four tests tell an LPAC whether a price is fair or thin:

• Number of bids. One binding offer can be the right answer, but the LPAC should see how many buyers were asked, how many priced, and each price as a percentage of NAV.

• An outside reference. A recent minority sale to a third party anchors the number outside the GP's own mark.

• A fairness opinion. ILPA's draft treats fairness opinions and valuation reports as standard deliverables.

• The GP's own rollover. A GP that rolls all its crystallised carry is pricing its own money at the same number.

A vehicle priced on one binding offer has no underbidder, so the other three tests carry more weight.

What does a continuation vehicle cost in fees and carry?

Rolling LPs don't keep their old terms by default. The new vehicle gets its own fee, carry and term, and an LP should rebuild this comparison before electing.

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The terms come from Morgan Lewis's 2026 continuation vehicles report, which draws on 169 transactions; the GP commitment row is from Kirkland's review of the ILPA draft.

Tiered carry (a lower rate up to one return hurdle, a higher one above it) matters more than the fee line: a rolling LP pays the higher tier only if the asset beats the hurdle.

Should an LP sell or roll?

Most LPs sell. Jefferies found only 17% of LPs rolled in continuation vehicle deals in the first half of 2025, as reported by ION Analytics, and the reasons are often about the LP rather than the asset: thin teams, board sign-off cycles or a plain need for cash.

Selling isn't neutral: it locks in the price the GP and the lead agreed, while rolling into the continuation fund is a new commitment to the assets moved, under new terms.

Illustrative example, with round numbers, not market data: a $10.0M stake priced at 95% of NAV, five years, a 1% annual fee and 12.5% carry on the gain below 2.0x.

3 columns. Drag the table sideways; the first column stays put.

Read the bottom line as a hurdle. At the assumed 1.8x, rolling wins only if the LP can't put $9.5M to work at better than about 10.5% a year for five years elsewhere. If the asset merely holds the price paid, rolling leaves the LP with about $9.0M, less than the cash it turned down.

Rolling is only partly a vote of confidence in the GP: it says more about the asset and the terms than about the manager.

The window to decide is short. Market convention is a 20 business day election period, and ILPA's 2026 draft proposes at least 30 business days after a complete disclosure package, as Kirkland sets out.

Six questions an LP should ask before electing

• Was a third-party sale tested, and why is the GP's own vehicle the buyer?

• How was the lead chosen, and how many bids came in?

• What's the price as a percentage of the latest NAV, how old is that NAV, and was it the GP's own mark or checked by an outside valuer?

• How much carry is the GP rolling, and how much new money is it committing?

• How do the fee and carry terms compare with the old fund's?

• Is there a status quo option, and how long is the election?

Conflicts of interest and ILPA's guidance on continuation funds

"[C]onflicts are inherent as GPs sit on both sides of the deal." ILPA, continuation funds guidance

ILPA's 2023 continuation funds guidance is being updated, and the 2026 draft aims at improved conflicts management, a stronger evidenced commercial rationale, fair and defensible pricing and process integrity.

Comment on the draft closed on 5 August 2026, and ILPA expects final guidance later in 2026. ILPA's 2026 disclosure template standardises the high-level information an LP receives for the election.

The four price tests above cover the number. An LPAC should add two checks of its own:

• Its consent, with the right under ILPA's draft to appoint its own financial advisor

• An election period measured against the draft's 30 business days

The LPAC's consent rights sit in the old fund's limited partnership agreement. Kirkland warns that parts of the draft read as comply-or-explain rules that will be hard to follow. I'd still build the process to the draft now, because LPs will judge the next deal against it whether it's final or not.

Questions a GP should answer before launching

Four questions decide whether a continuation vehicle is the right exit:

• Can the asset create enough further value to justify a new vehicle, its fees and the time it takes?

• Would a third-party sale today produce a better outcome for LPs? A sell-side process with a live underbidder is the benchmark the LPAC will compare you with.

• How much carry and new money will you roll, and can you show it?

• What will the LPs who sell conclude about your next fund?

Where a continuation fund costs the next fundraise

A primary LP reading your next PPM (private placement memorandum) compares your election with the market: Jefferies counted only 17% of LPs rolling in the first half of 2025, as ION reported. A roll rate well below that, or a GP that rolled little of its own carry, is what a new LP asks about.

The price travels too. A deal close to NAV supports the GP's marks across the rest of the portfolio, and rolled carry and the GP's new commitment become questions in the next PPM.

A deal struck well below NAV tells the next fund's LPs what a buyer with full diligence thought the mark was worth.

I'd settle the election before the first close of the next fund. If the calendar won't allow it, brief the LPAC on both timetables at once, so no LP learns about the second process from someone else.

How spectup runs a continuation fund placement and the next raise

spectup acts for the GP as placement agent: on the continuation fund, on the next primary fund, or on both. The lead investor and the secondary buyers negotiate for themselves; spectup's client is the GP alone.

The mandate fits a manager raising a vehicle of $50M or more, a continuation vehicle included, with a track record an LP can diligence. spectup doesn't set the continuation vehicle's price and doesn't represent the LPs who elect. The work runs in five steps:

1. Capital strategy. Raise size, structure and the investors that clear it, with the election's closing date and the next fund's first close on one calendar.

2. Valuation and positioning. For the vehicle, the case for the asset and the price route the LPAC will test; for the next fund, a story that absorbs the GP-led deal: why the asset moved, at what price, what the GP rolled.

3. Offering materials. The PPM, deck, model, term sheet and data room, with the GP-led deal disclosed up front, because an LP who finds it in diligence reads the silence as concealment.

4. Investor targeting and outreach. Secondary buyers for the vehicle; for the next fund, a list that opens with the existing LPs, sorted by who sold and who rolled, then adds new LPs found through Valicon.ai, spectup's own investor platform built on primary data from real transactions plus behaviour data, and an in-house signal engine that times the investor outreach.

5. Diligence and close. LP questions about the secondary are answered once, in the data room, through to signed subscription documents.

The network behind step four has three layers: 440+ direct relationships from closed transactions, 2,500+ investors and LPs spectup has sat in front of with clients, and 30+ partner firms whose own investors open on a shared mandate.

The fee is a monthly retainer for 8 to 12 months plus a placement fee, a percentage of capital placed and capped in the mandate, due when the raise closes and the funds reach the fund.

What to settle before launching a continuation vehicle

The four questions above decide whether to launch. Two decisions decide how, and both come before the first call to a lead investor:

1. The price route. A competitive process, or a single binding offer backed by an outside reference point, so the LPAC can run the four price tests.

2. The calendar. The date the election closes, set against the next fund's first close, with enough gap that no LP decides both at once.

Set the election's closing date first, then count back from your next fund's first close. Talk to spectup before you call a lead investor: one 30-minute call shows whether the structure clears and which investors would underwrite the vehicle, the next raise or both.