Continuation Funds: Fueling the Rise in Secondaries

Continuation funds are redefining the GP-led secondary market amid the recent resurgence, positioning themselves as a vital alternative exit route for private equity (PE) firms. Despite a few challenges, these funds are gaining traction among stakeholders.

According to Jefferies, GP-led transaction volume in the global secondary market hit $28 billion in 1H24, exhibiting 56% YoY growth and the highest volume since 2021 in the first half of any year. Continuation funds accounted for 90% of these transactions, an improvement from 88% in 2023.

The resurgence in enthusiasm for these funds can be attributed to LP’s demand for liquidity in a market where the exit activity is muted. Continuation funds gained popularity in 2021 and 2024, two years with contrasting market conditions. In 2021, deal-making was robust in contrast to the present scenario. The motivation for LPs then was to gain more from the assets that were performing well, thereby allowing their continuation.