One of the hottest places in private markets this summer is in the secondary market, where a record amount of big funds and their customers struggling to exit positions are finding a way out.
Welcome to continuation funds or vehicles, also known as “CVs.”
A good chunk of this year’s activity in that space has so far come from private fund managers, most of all those in private equity. The vehicles allow fund managers to flip older assets from their maturing funds into new, fresher pools of capital. Funds do this because they don’t think they’ve gotten enough value from their older assets.
The structure style has largely been normalized by the private equity market, according to Jefferies. Not without a history of controversy, continuation funds have so far proven to be one of the fastest-growing areas of the secondaries market this year, accounting for $41 billion worth of transaction volume.
That’s a 60% jump from the level of activity in the first half of last year. Rollovers into these fund structures now make up 19% of all industry exits.
Over the first half of 2025, close to 75% of the 50 largest private fund managers said they used a continuation fund both for giving investors a way out and hitting their own goals.
Traditional private equity funds raise money from large institutional investors in order to buy out companies. The next step is to improve margins so that they can eventually take these companies public or sell them and return profits to their investors.
Private longer: Wall Street’s charging bull. (Photo by ANGELA WEISS / AFP) (Photo by ANGELA WEISS/AFP via Getty Images) ·ANGELA WEISS via Getty Images
That model has faced difficulty in recent years, with the struggle for exits coming down to a combination of valuation discrepancies between buyers and sellers amid higher interest rates, which has tapered growth in the IPO and M&A markets and led to a growing backlog of unsold assets.
The slower exits have also contributed to a tougher year for the stocks of Wall Street’s biggest private market megafund managers. That includes Blackstone (BX), Kohlberg Kravis Roberts & Co. (KKR), Apollo Global Management (APO), and Blue Owl (OWL). (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Blackstone and KKR are down 3% and 6%, respectively, while the stocks of Apollo and Blue Owl have fallen roughly 17% and 19% over the same period.
There is a gap between the inventory of active private sponsored companies operating globally and the amount of opportunities currently available in the deals market, according to Andrew DiGeronimo, co-head of partnership solutions for major private markets player Warburg Pincus.
“I think you’ll see record year after record year over the next several years in this business just simply because of a structural imbalance,” said DiGeronimo.
In short, fund managers have more assets to sell than there is demand from buyers. That poses an obstacle for delivering investors the cash profits they planned for.
A typical buyout fund has a lifespan of 10 years, while a little over half of all active private equity funds globally (55%) are between six and nine years old, according to a June report from PitchBook.
The wider controversy surrounding continuation vehicles revolves around conflict of interest questions from investors, given how the fund manager or financial sponsor selling the asset is often also the buyer. Within overall fund manager or general partner-led secondary transactions (87% use continuation vehicles), just 17% of limited partners rolled their investment over into these new funds over the first half of this year, according to Jefferies.
Slower exits: The Blackstone headquarters in New York City. (REUTERS/Jeenah Moon/File photo ·Reuters / Reuters
Critics also worry about fund managers using these rollovers as an opportunity to charge investors with new fees on old assets.
Still, there has been some effort to establish parameters around continuation vehicles. The Institutional Limited Partners Association, a trade group, issued guidance on the practice in 2023, calling for more deal transparency in addition to hiring outside parties to review conflicts of interest and ensure a reasonable sales process.
In some cases, big funds are now using the maneuver as a way to hold on to their biggest assets. For example, New Mountain Capital formed a $3.1 billion continuation vehicle in April to roll portfolio healthcare company Real Chemistry into its own single-asset fund.
“This growth is not merely cyclical but reflects a fundamental shift in how private equity liquidity is managed, and even the most resistant investors are now seeking exposure to the asset class,” according to Jefferies.
Warburg’s DiGeronimo sums it up even more succinctly as “the trend of private for longer.”
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
