Key Takeaways
- • Continuation funds (GP-led secondaries) generated record transaction volume of $70+ billion in 2024, accounting for 45-50% of secondary market deal volumes over recent years, establishing them as a dominant segment within a maturing private equity market.
- • The global secondaries market reached $160 billion in transaction volume in 2024—a new annual record—positioning continuation funds as a critical liquidity mechanism amid slowing exit activity and reduced distributions to LP investors.
- • Continuation funds enable private equity managers to simultaneously provide liquidity to existing investors while extending hold periods on high-quality portfolio assets, backed by new capital from secondary investors—a structural solution to the tension between fund lifecycles and asset value creation timelines.
- • The rise of continuation funds reflects broader structural shifts in private markets: declining deal and exit volumes driven by inflationary and interest rate pressures have increased LP demand for distributions, while the secondary market has evolved to address this supply-demand imbalance.
- • Continuation funds have transitioned from a crisis-era workaround into a standard exit strategy, particularly for small and mid-market portfolio companies with significant transformational growth potential that warrant extended holding periods beyond original fund lifecycles.
Summary
The continuation fund market has matured into a central component of the broader private markets ecosystem. According to Schroders Capital, continuation funds—also known as GP-led secondaries—recorded more than $70 billion in transaction volume during 2024, marking a record for the vehicle type. This figure represents 45-50% of total secondary market deal volumes, underscoring the structural importance these vehicles have assumed within private equity's secondary trading landscape.
The growth of continuation funds reflects two interconnected market dynamics. First, the private equity market has faced persistent headwinds: inflationary pressures and elevated interest rates have materially slowed deal and exit activity across the sector, reducing the flow of distributions back to limited partners. Simultaneously, the broader secondaries market—which recorded a global record of $160 billion in transaction volume in 2024—has evolved to address this liquidity gap. Continuation funds have become the primary mechanism through which this evolution manifests.
The strategic appeal of continuation funds centers on their dual-purpose structure. General partners can extend the holding period of high-performing assets beyond a fund's typical lifecycle (often ten years or longer) while simultaneously offering existing investors a partial liquidity event. New capital, sourced from secondary investors and other continuation fund specialists, flows into a newly formed vehicle that acquires selected assets from the original fund. This arrangement addresses a fundamental mismatch in private markets: portfolio companies often require more time than standard fund lifecycles allow to realize their full value potential, yet LPs increasingly need distributions and liquidity.
Continuation funds have proven especially valuable for small and mid-market portfolio companies demonstrating significant transformational growth potential. By enabling sponsors to retain these assets while refreshing the capital structure and investor base, continuation funds provide a flexible alternative to traditional exit routes—be they secondary sales, dividend recapitalizations, or third-party acquisitions. The market's trajectory indicates that as the private equity market matures and expands, continuation funds will continue to serve as a cornerstone of the secondary market infrastructure, particularly in periods characterized by extended holding requirements and constrained exit environments.
The growth of continuation funds reflects two interconnected market dynamics. First, the private equity market has faced persistent headwinds: inflationary pressures and elevated interest rates have materially slowed deal and exit activity across the sector, reducing the flow of distributions back to limited partners. Simultaneously, the broader secondaries market—which recorded a global record of $160 billion in transaction volume in 2024—has evolved to address this liquidity gap. Continuation funds have become the primary mechanism through which this evolution manifests.
The strategic appeal of continuation funds centers on their dual-purpose structure. General partners can extend the holding period of high-performing assets beyond a fund's typical lifecycle (often ten years or longer) while simultaneously offering existing investors a partial liquidity event. New capital, sourced from secondary investors and other continuation fund specialists, flows into a newly formed vehicle that acquires selected assets from the original fund. This arrangement addresses a fundamental mismatch in private markets: portfolio companies often require more time than standard fund lifecycles allow to realize their full value potential, yet LPs increasingly need distributions and liquidity.
Continuation funds have proven especially valuable for small and mid-market portfolio companies demonstrating significant transformational growth potential. By enabling sponsors to retain these assets while refreshing the capital structure and investor base, continuation funds provide a flexible alternative to traditional exit routes—be they secondary sales, dividend recapitalizations, or third-party acquisitions. The market's trajectory indicates that as the private equity market matures and expands, continuation funds will continue to serve as a cornerstone of the secondary market infrastructure, particularly in periods characterized by extended holding requirements and constrained exit environments.
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