Surge in continuation funds expected to continue in 2025

• The global secondaries market hit $152B in 2024, a record-breaking figure, and continuation funds now form close to half of that.  

• Benchmarking in continuation funds is difficult, making thorough due diligence vital. Legal AI can aid investors in making more informed decisions.  

• Continuation funds can bring much-needed liquidity to Limited Partners (LPs) while allowing General Partners (GPs) to hold on to prized assets.  

Secondaries in 2024

The total secondaries market hit a record $152B in 2024, according to Lazard, with GP-led secondaries responsible for almost half of that at $72B. This was a 50.4% increase compared to GP-led secondaries deal value in 2023.  

Most GP-led secondaries are continuation vehicles, with a minority of deal volume left for tender offers, preferred equity structures and strip sales. Almost two-thirds of this activity is in North America, about 30% in Europe and roughly 4% in Asia and the rest of the world.  

This surge is expected to continue as new entrants, including retail investors, move into private capital. On top of that, there are record levels of dry powder within secondaries.  

With new entrants and plenty of dry powder to be deployed, competition will be stiff in the industry throughout 2025. The pressure will be on for GPs to work as efficiently as possible to meet LP demand for liquidity or re-investment in a new fund.  

What is a continuation vehicle and why do GPs set them up?

A new investment vehicle set up to take on the investments of a fund at the tail end of its lifespan, usually around 10 years. If a GP wants to hold onto an asset for longer than the length of a fund, that means LPs can’t redeem on their investment.  

Across private capital, a lack of exit activity means GPs are struggling to return LP capital, while LPs have an ongoing demand for liquidity. At the same time, a challenging fundraising environment has made it hard for GPs to raise new vehicles. The continuation vehicle gives LPs the option to either recommit, or to cash out.  

In the new vehicle, generally LPs will be offered to lock-in for around half the time of a regular private equity fund. Research by Morgan Stanley has found that continuation funds can outperform buyout funds on a median basis.  

Single vs multi-asset funds

Continuation funds can be single- or multi-asset. Large-cap GPs tend to set up more multi-asset continuation vehicles, ‘to generate optional liquidity in a scalable manner’ according to research by BlackRock. For example, in December 2024, private equity investors Warburg Pincus held the first close of its first multi-asset continuation fund, raising $2.2bn.  

“This transaction provides our investors with an option to take accelerated liquidity at a market-driven price, while allowing the portfolio companies the opportunity to continue to pursue their long-term growth plans, a win-win for all involved,” said Eddie Huang, Managing Director, Global Head of Fundraising and Investor Relations at Warburg Pincus.  

Meanwhile mid-market GPs are more likely to use single-asset vehicles, to hold onto their most promising assets. In September 2024, for example, San Francisco-based mid-market private equity firm Gryphon set up its first single-asset continuation vehicle for Vessco Water, a distribution and services platform in the water and wastewater treatment market. Gryphon had acquired Vessco at the end of 2020 as part of its $2.7bn Flagship Fund VI.  

How can legal AI help GPs who are setting up or running continuation vehicles?

A common challenge in private equity transactions is the difficulty of finding readily available benchmarks for asset valuation. This adds complexity to pricing secondaries. Historical valuations may not accurately represent current market conditions and often rely significantly on GP reporting. Additionally, understanding a GP’s performance history can be essential.  

Thorough due diligence is essential to prevent mispricing when investing in secondaries. However, historically, carrying out a comprehensive due diligence process could be challenging due to the significant time and financial resources it often requires.  

Now however, AI can hugely simplify due diligence processes, cutting down on the time it takes and allowing investors to make faster, more informed decisions.  

Legal professionals and non-lawyers can curate a list of key issues relevant to their contracts, load those contracts into an AI Reports tool and receive precise summaries for each, presented in clear, plain-language reports. These reports include clickable citations, enabling users to efficiently verify the summarized information.

Explore how AI enhances speed, accuracy, and due diligence in Robin AI’s latest report on AI in Private Markets.

This content is for informational purposes only and does not constitute investment advice. 

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