Over the past decade, private equity benefited from a generally supportive exit environment. Low interest rates, accessible financing, and steadily rising valuations made it possible to bring strong portfolio companies to market with relatively little friction. Firms could crystallize gains, return capital to investors, and redeploy quickly into new opportunities.
Today, the environment is different.
Higher financing costs, tighter credit, and a prolonged slowdown in IPO markets have reduced overall exit activity. Holding periods across buyout funds have lengthened, and many assets remain fundamentally strong but difficult to exit at acceptable valuations. The result is a growing overhang of ageing companies across the industry. (Some critics call these “zombie” companies, but I wouldn’t go there.)
Continuation vehicles: win-win-win for all
Against that backdrop, continuation vehicles (“CVs”), once viewed as niche or tactical, have moved closer to the center of the private equity playbook. In 2025, the GP-led secondary market had grown to approximately $105 billion, with CVs accounting for roughly 84%.
Global GP-led secondary volume and % CV share
Source(s): RJ PCA market intelligence as of January 2026.
Their growing role has drawn attention, and with it a familiar refrain: that CVs amount to sponsors “selling to themselves,” a way to delay exits or avoid hard decisions. It is an understandable reaction to a structure that sits outside the traditional exit playbook. But viewed in context, CVs are better understood as a way of addressing competing pressures across the ecosystem.
For general partners, they offer a mechanism to deliver liquidity to an existing fund while maintaining exposure to assets where conviction remains high. For limited partners, they introduce choice, allowing investors to take liquidity or roll exposure forward based on updated underwriting rather than legacy assumptions. For portfolio companies, continuity of ownership can preserve strategic momentum, management relationships, and long-term planning that might otherwise be disrupted by a full change of control.
Finally, for new investors, CVs have offered access to attractive and known assets, and early performance has generally been viewed as encouraging. As a result, participation from secondary investors has expanded and fundraising across the strategy continues to gain momentum, contributing to a deeper market for GP-led transactions.
A bifurcated market
In practice, CVs are being used across a market that has become increasingly bifurcated. At one end are trophy assets: businesses that have achieved the original underwriting return targets, continue to command conviction, and still offer a credible path to further value creation. In these situations, extending ownership is a deliberate choice, allowing sponsors and investors to pursue a longer-term strategy rather than forcing an exit dictated by fund timing limitations.
At the other end are assets that have yet to meet return targets. These are businesses facing operational strain, strategic uncertainty, or cyclical pressure, where a clean exit may be difficult to achieve in the current environment. In those cases, the same structure is used to provide time and potentially additional capital for investment to effectuate growth, rather than pushing an asset into a constrained sale process. These assets carry a higher perceived risk profile and may require valuation adjustments to create an attractive secondary investment opportunity.
Ultimately, easing the ageing‑asset backlog will require activity across both ends of the market.
A similar dynamic at the manager level.
CVs are increasingly being used by managers who are facing fundraising challenges yet control a small number of strong businesses. The structure allows sponsors to extend ownership of those assets, preserve their fee base, and maintain operating infrastructure, even as broader fundraising becomes more challenging.
For limited partners, this has made decision-making more situational. Declining a new flagship fund does not automatically mean declining a CV, particularly when the underlying company remains compelling. Stronger franchises can use the structure to hold on to top-performing assets and capture additional value over a longer horizon. For others, CVs can serve as a stabilizing bridge while outcomes are still being worked through. In both cases, CV activity is likely to increase and further establish itself as a viable exit strategy.
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