Glossary · Fund life

What is a continuation vehicle?

A continuation vehicle is a new fund that buys one or more assets from a manager’s older fund, so existing investors can cash out or roll over.

In practice

Usually run as a single-asset or multi-asset deal, the vehicle is typically funded by new secondary investors, often led by one investor who sets the price. The manager normally commits fresh capital and resets carry terms. An LPAC usually must approve the conflict, and a fairness opinion is common. It is a type of GP-led secondary.

An example

Round numbers, not a real fund

Say a 10-year-old fund holds one company the manager still likes. A new vehicle buys it, and old investors choose to take cash or roll into the new one.

Why it matters

It gives managers more time with their best assets, and it raises the question of who set the price.

In the news

Related terms

GP-led secondaryA GP-led secondary is a deal run by a fund manager to move assets out of an existing fund, usually into a continuation vehicle, with new investors buying in.
LPACThe LPAC, or limited partner advisory committee, is a small group of investors that advises the manager and usually approves conflicts of interest and certain term waivers.
Fair valueFair value is what an asset would fetch in an orderly sale between willing buyers and sellers on the measurement day. Accounting standards require funds to report it.
LP-led secondaryAn LP-led secondary is a sale by an investor of its stakes in one or more funds to a buyer, often to raise cash or rebalance its portfolio.
Carried interestCarried interest is the share of a fund’s profits, typically 20%, that the manager earns after investors get their money back and clear the preferred return.

The terms, in the news each morning.

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