Continuation Funds: A Structural Phenomenon?

A recurring topic of discussion among secondaries market players is the extent to which the growth in GP-led deal volume in recent years has primarily resulted from transitory factors, such as softness in exit markets.  A recent report (available here) from Schroders makes a compelling case that the expanding utilization of GP-leds is a structural rather than cyclical phenomenon.  We recommend reading the full report but summarize a few of the key insights below:

• Schroders notes that fund-to-fund exits have historically represented a significant proportion of deal volume for mid- and large buyout firms.  Continuation vehicle transactions, they argue, are better understood as a substitute for these types of buyout exits than as analogues to vanilla LP secondaries.  Schroders predicts that continuation fund exits will displace some of the traditional fund-to-fund buyout deal flow over the coming decade.
• Continuation vehicle transactions have appeal that goes beyond comparative attractiveness when other exit markets are sluggish.  Schroders summarizes the key structural factors as follows:
  • Continued private equity ownership beyond the original holding period is an established way to drive company transformation;
  • Ongoing company transformation under private equity ownership often does not require a change in owner;
  • Continuation investments are a cost-effective way to deliver ongoing transformation;
  • Continuation investments have more predictable returns and faster liquidity compared to traditional buyouts; 
  • The current cyclical exit gap is accelerating demand for alternative liquidity solutions.
• The Schroders analysis estimates the proportion of buyout deals that are potential candidates for continuation vehicle exits, and projects 3x-6x growth in the continuation investment market over the next decade.

Over 2025, the Ropes & Gray secondaries team has observed continued growth in the popularity of GP-leds.  In particular, we are increasingly seeing these transactions deployed in creative ways to both provide liquidity for LPs and also to address a range of other corporate financing needs.  

Our clients, consistent with the Schroders analysis, see GP-leds as a tool with multi-faceted, long-term value.  As the market grows in sophistication, we believe GP-leds will become an even more versatile option for sponsors and investors.

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