The Growing Popularity of Continuation Funds

May 21, 2024 | Hayley McCollum, Research Analyst

Historically, the private equity secondary market has been used by limited partners (“LPs”) to sell exposures at the end of their lives and as such contained only tail-end exposures. Selling these lingering exposures to private equity funds allowed LPs to clean up their balance sheets and fueled the growth of secondary private equity funds within the broader private equity space. As the market evolved, however, higher-quality assets began transacting as investors started to use secondary markets as a useful portfolio management tool. More recently, general partners (“GPs”) have come to occupy an increasing percentage of the overall market. In 2023, about $110 billion in volume traded in private equity secondaries, with about 50% of the total transaction activity represented by GP-led transactions.

In this newsletter, we provide an overview of continuation funds, including their growth, structure, transaction requirements, and considerations for investors.

Read > The Growing Popularity of Continuation Funds

Hayley McCollum
Research Analyst

Get to Know Hayley

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF. General description: Line chart showing down rounds in venture capital-backed companies. Chart subtitle: Over the last two years, there has been a noticeable increase in down rounds for venture-backed companies. Chart source: Source: Cooley GO as of September 30, 2023 Chart visual description: Y-axis labeled “Down Rounds as a % of Total” and ranges from 0% to 30%. X-axis labeled in quarterly increments, from 1Q21 through 3Q23. Down Rounds (% of Total) plotted in dark orange; average plotted in dotted light orange. Chart data description: Average at 9.6%. 1Q21 at 5.7%. 2Q21 at 2.7%. 3Q21 at 2.3%. 4Q21 at 0.4% (trough for period shown). 1Q22 at 3.0%. 2Q22 at 4.1%. 3Q22 at 10.2%. 4Q22 at 14.1%. 1Q23 at 15.5%. 2Q23 at 21.2%. 3Q23 at 26.8%. End chart description. See disclosures at end of document.

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