Continuation Vehicle
A continuation vehicle is a new investment vehicle created to hold one or more assets from an existing fund, typically extending ownership and providing liquidity options to current LPs.
Allocator relevance: Continuation vehicles are governance-sensitive events—allocators must evaluate conflicts, pricing, and who controls the process.
Expanded Definition
Continuation vehicles are often used when a GP wants to hold an asset longer than the original fund term or to reset capital for follow-on growth. LPs are typically offered choices: roll into the new vehicle or sell for liquidity (often through a secondary buyer).
The core issue is alignment: the GP is on both sides (seller from the old fund and manager of the new vehicle). That creates potential conflicts around valuation, fees, and disclosure.
Decision Authority & Governance
Governance requires strong conflict management: independent valuations, LPAC approvals, fair process disclosure, and clarity on economics (fees/carry in the new vehicle). Decision authority often runs through LPAC and legal review; the fairness of options presented to LPs is critical.
Common Misconceptions
- Continuation vehicles are always a red flag.
- GP-led processes guarantee fair pricing.
- LP choice means the process is inherently fair.
Key Takeaways
- Evaluate conflicts and process integrity, not just returns.
- Pricing, fees, and valuation policy are the key levers.
- LPAC oversight and transparency determine trust.