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 commitments a GP's next fund needs. They took 12.4% of direct private equity fundraising in 2025, up from 1.2% in 2018, according to Preqin's 2026 data, and the LPs who sell or roll in the election are the same LPs your next fund will ask.

spectup acts on the GP's side only, as private placement agent for managers raising $50M or more, whether the money goes into a continuation vehicle, the next primary fund or both.

How does a continuation fund work?

A continuation fund transaction is a GP-led secondary. 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.

The law firm Morgan Lewis now calls these vehicles a recurring portfolio management tool. They run in six steps, and LPs get a say only at the fourth and fifth:

1. Asset selection. The GP picks companies in an older fund, usually near the end of its term, with value still to create.

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

3. Syndication. Other secondary buyers join the lead to fund the purchase.

4. LPAC review. The old fund's LP advisory committee (LPAC) has to clear the conflict, usually by formal consent, since the GP stands 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

Who starts the sale decides who has to respond. In an LP-led deal one investor sells its fund interest and the other LPs aren't affected; in a GP-led secondary every LP in the fund has to decide, which is why the two halves of the market for private equity secondaries carry different governance.

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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 for a loan portfolio. 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

Without a new vehicle, a GP can still raise cash for its LPs or for the fund:

• Tender offer. A buyer bids for LP interests in the existing fund at a set price and the fund carries on; paired with a commitment to the next fund it is a stapled secondary.

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

• NAV facility. The fund borrows against its portfolio, adding fund-level debt that LPs scrutinise.

ILPA, the Institutional Limited Partners Association, already asks GPs to take the LPAC through these alternatives, so expect the LPAC to ask why the vehicle beat them and a straight sale to a third party.

How large is the GP-led secondary market?

Many institutions that fund GP-led secondaries also commit to primary funds, which is why this market's size matters to the 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, raising $75.0bn, up from 13 in 2018. Houlihan Lokey measures continuation fund transaction volume, Preqin the capital raised by the funds that closed.

Why GPs use continuation funds

GPs launch these vehicles for the asset, for the fund, or both:

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

• Fresh capital. Money for add-ons the old fund no longer has.

• Liquidity for LPs. Cash 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.

Behind many launches sits the need to lift 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. 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 the 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 deals 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 accepts the principle and argues for reasonable price discovery directed at a fair, executable outcome.

"[B]idder pools are not always broad, and engaging in a competitive process may result in trade-offs or not be feasible in some cases given the asset, industry or market."

Kirkland & Ellison ILPA's 2026 draft guidance

A number set by the party putting fresh capital in is the closest thing to an arm's-length price this structure allows. Four tests tell an LPAC whether a price is fair or thin:

• Number of bids. 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 beyond 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, usually five years, so set the old fund's LPA (limited partnership agreement) terms against each bar below, from Morgan Lewis's 2026 report on 169 transactions.

Tiered carry (a lower rate up to one return hurdle, a higher one above it) matters more than the management fee, because 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, often for reasons about the LP rather than the asset, such as thin teams, board sign-off cycles or a need for cash.

Selling isn't neutral either. 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 on the price and 12.5% carry on the gain below 2.0x.

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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.

The window to decide is short. Market convention is a 20 business day election period, and ILPA's October 2026 guidance asks for at least 20 clear business days from receipt of the final election package, extendable for complex deals.

What an LP should ask before electing

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

• 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."

ILPAcontinuation funds guidance

ILPA's 2023 continuation funds guidance was followed on 20 October 2026 by new continuation vehicle guidance, which aims at improved conflicts management, a strong evidenced commercial rationale, fair and defensible pricing and process integrity.

ILPA's 2026 disclosure template standardises the high-level information an LP receives for the election.

Beyond the price tests above, an LPAC should check:

• Whether it should appoint its own legal advisor before consenting, an option ILPA's guidance asks the GP to offer where proportionate

• Whether the election period gives at least 20 clear business days after the final package

The LPAC's consent rights sit in the old fund's limited partnership agreement. Kirkland warns that parts of the draft read as hard-to-follow comply-or-explain rules. I'd still build to it now, because LPs will judge the next deal against it.

Questions a GP should answer before launching

• 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.

• 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) will hold your roll rate against Jefferies' 17%, and ask about a rate well below it or a GP that rolled little of its own carry.

The price travels too. A deal close to NAV supports the GP's marks across the portfolio; one well below NAV hands the next fund's LPs a buyer's view of the mark, formed after full diligence.

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 GP's continuation vehicle placement and next raise

spectup acts for the GP alone, as placement agent. The lead and the secondary investors negotiate for themselves, and spectup neither sets the vehicle's price nor represents the LPs who elect.

The mandate fits a manager raising $50M or more with a track record an LP can test in diligence. 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. The asset's case and price route for the vehicle; for the next fund, a story that explains why the asset moved, at what price, and what the GP rolled.

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

4. Investor targeting and outreach. Secondary buyers for the vehicle; for the next fund, the existing LPs first, sellers and rollers handled as two conversations. New LPs are found through investor data from spectup's closed transactions and approached in the order the in-house signal engine sets.

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

Step four draws on three layers of relationships. There are 440+ investors and LPs we know from closed transactions, 2,500+ we have met across the table on client raises, and 30+ partner firms that open their own investor lists when a mandate is shared.

The GP pays spectup a monthly retainer for the life of the mandate and, once the money has arrived, a placement fee on the capital that closed, with a cap written into the mandate.

What to settle before launching a continuation vehicle

Before you call a lead investor, choose the price route, either a competitive process or one binding offer with an outside reference, so the LPAC can run the four tests. Then count the election's closing date back from the next fund's first close, so no LP is asked to sell or roll and to commit to the new fund at the same time.

A 30-minute call with spectup shows whether the structure clears and which investors would underwrite the vehicle, the next raise or both.