Private Equity houses are relying more on continuation funds as a major exit avenue in the backdrop of a tough deal environment. As per Jefferies, PE sponsors offloaded $41bn worth of assets to their own continuation vehicles during the first half of 2025 – an all-time high and 60% more than last year. This already accounts for 19% of all PE exits for 2025.
Why the surge?
Stalled IPO markets and fewer strategic buyers: With IPO activity and M&A volumes subdued, traditional exit paths are harder to realise.
Liquidity pressure: After several years of low distributions, investors are focused on cash returns. This gives them the choice to cash out or roll over.
Sponsor incentives: These transactions allow PE firms to hold best-in-class assets for longer, realise performance fees, and maintain management revenues.
The secondaries market as a whole totalled $100bn in H1 2025, a near 50% year-on-year jump, driven by GP-led transactions and LP stake sales.
According to a Bain & Co. survey, two out of three investors favour traditional exits, and only one in six backs continuation structures. Concerns centre on conflicts of interest and recycling of capital.
However, the trend appears to be here to stay. As one Jefferies executive put it: “Now this is a bona fide exit route for every fund manager out there.”
Will continuation funds become a mainstay in the PE toolkit – or will investor pushback reshape the market?
Source: Financial Times