Continuation Vehicles: Evolving Trends and Strategic Considerations for Family Office Investors

Partner Content Provided by Day Pitney

Continuation vehicles (also known as continuation funds) are growing in popularity as investors seek to
maximize asset value over longer periods of time. A continuation vehicle is a private equity vehicle that allows a fund sponsor to extend ownership of one or more assets beyond the original investment fund’s life cycle, typically by transferring them into a newly formed fund with additional capital from existing and new investors. The increased prevalence of these vehicles can be attributed to a confluence of factors, most notably the significant slowdown in mergers and acquisitions activity (i.e., the lack of exit activity, resulting in a liquidity crunch that tests the bond between sponsors and limited partners (LPs)) as well as the significant amount of “dry powder” in the secondary funds market. On the one hand, continuation vehicles offer sponsors a mechanism to retain high-performing assets beyond the existing fund’s life cycle for an additional three to five years...

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