Continuation Vehicle
Private Equity glossary · Private Equity Fundamentals
Definition
A new fund vehicle created (by the same GP) to purchase one or more 'crown jewel' assets from an older fund, providing the GP extended hold beyond fund-life constraints while crystallizing carry on the transferred portion. Existing LPs are offered (a) a cash exit at a negotiated transfer price, or (b) a rollover into the CV on the same or new economic terms. New secondary buyers provide the cash for the exit option. The GP stands on both sides of the transaction (selling fund vs. CV) — the central conflict-of-interest in GP-led secondaries, mitigated by LPAC approval, fairness opinions, and competitive bid processes. By 2025, GP-leds represent 40-50% of secondary volume.
Continuation Vehicle in plain English
PE funds have a built-in expiration date, so when a fund is aging out but still owns a stellar business it doesn't want to sell cheaply, the manager can set up a continuation vehicle — a fresh fund that buys that prized 'crown jewel' asset from the old one, giving it more time to grow while letting the manager finally collect their performance pay on it. Existing investors get a choice: cash out now at the agreed price, or roll their stake into the new vehicle and stay invested. The tricky part is that the same manager is on BOTH sides — selling from the old fund and buying into the new one — which is a real conflict of interest, so it's policed with investor-committee approval, independent 'fairness opinions,' and competitive bidding to keep the price honest. These manager-led deals have exploded, making up 40-50% of the secondary market by 2025.
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