Continuation Fund
Definition
A continuation fund is a new vehicle a private equity firm raises to buy one or more companies from its own older fund, letting it keep a prized asset past the original fund’s life. Existing investors either cash out or roll into the new vehicle.
In practice
Continuation funds are the fastest-growing corner of the secondaries market and the most debated: the sponsor sits on both sides of the trade, setting the price at which it sells to itself. Done well, everyone gets optionality. Done badly, it is a fee machine.