Private equity (“PE”) funds are built with an expiration date in mind.

Investors commit their money for years. The firm buys businesses, improves them, and eventually sells them. Then the fund winds down. That rhythm matters. It turns paper returns into cash.

However, PE firms found a new way to keep the clock running.

Continuation vehicles (“CVs”) were originally a small exception. They let a private equity firm keep one great asset a little longer while giving early investors a chance to take money off the table.

In 2015, CV volume was $7 billion or less. By 2025, it had blown past $100 billion.

Private Equity International put the number at $106 billion, almost 20% of global sponsor-backed exit volume. The Financial Times reported CVs accounted for roughly a fifth of private equity exits.

The exit door is getting jammed, and CVs have become the pressure valve keeping private equity from feeling the full weight of today’s weak selling market.

Private equity has been running short on distributions..

According to CAIA, from 2022 through 2024, distributions as a percentage of net asset value ran far below normal, at 13% versus the historical 28%. Vintages from 2018 to 2021 were also 0.2 times behind planned distributions to paid-in capital.

That matters because private equity depends on recycling money. Limited Partners (“LPs”) need cash back from old funds before they commit to new ones. Meanwhile, General Partners (“GPs”) need successful exits to show returns and raise the next fund.

Right now, that machine is strained. CAIA noted that for every $3 private equity firms are trying to raise, only $1 of capital is available, compared with a historical ratio of 1.3-to-1.

In a healthier market, firms sell companies to strategic buyers, take them public, or sell them to another sponsor. In this market, many are turning inward.

That is where CVs come in.

GP-led secondary volume reached $115 billion in 2025. CVs made up 89% of that GP-led activity and roughly 43% of the entire secondary market.

The GP-led market more than tripled from $35 billion in 2020 to $115 billion in 2025, while CVs grew from 5% to 14% of private equity exit volume over that stretch.

CVs have evolved from a niche tool to a central exit route.

Nearly 75% of the largest global private equity firms have now completed at least one continuation transaction. That shows CVs have moved into the private equity playbook, exactly when the industry needs a new way to create liquidity.

The trouble is built into the structure of CVs themselves.

In a CV, the same private equity sponsor often sits on both sides. It sells an asset out of an older fund. It buys that asset into a new fund. It keeps managing the company after the transfer.

That means the sponsor helps steer the price, controls the story around future value creation, and often earns fees from the new vehicle. CAIA points out that this dual role creates tension around valuation, especially because pricing can depend on future improvement that has yet to happen.

The conflict gets deeper when carried interest is crystallized at the transfer. The GP can lock in performance economics before the ultimate exit. Industry practice often expects GPs to roll that carry into the CV, yet the need for that safeguard shows how fragile alignment can become.

Single-asset CVs can still make sense. They were built for rare trophy assets. A strong business may need a few more years to reach its full value, and investors who want out can take liquidity.

Multi-asset CVs are a different signal. They can move a whole portfolio, or the leftovers of an aging fund, into a new structure.

CAIA notes that single-asset CVs tend to have stronger performance and higher valuation metrics than multi-asset CVs. It also found that multi-asset CV pricing skewed below reported NAV, while single-asset deals are more likely to price at or above NAV.

That is a quiet warning. Lower pricing means the private marks were too generous, or buyers are demanding a discount for risk, time, and complexity.

LPs face the pressure too. CAIA says GP-led processes often come with compressed timelines, even though investors must re-underwrite the asset and decide whether to sell or roll.

For LPs without dedicated deal teams, that can turn a major underwriting decision into a rushed administrative choice.

Unfortunately, the market is already stretching the structure of CVs further.

Private Equity International reported that 2025 brought the arrival of “CV-squareds,” where one continuation vehicle gets rolled into another.

More than half of LPs currently invested in a CV said they had already experienced a rollover or expected one within a year.

And that shows private equity is “extending” the extension.

The Financial Times also highlighted a newer concern

Some LP advisory committee members may work for institutions whose other business lines invest in CVs. That can put fund investors on both sides of the same transaction.

One investor described committee members in that position as quasi-insiders. Another executive said multi-strategy firms had used potential future fund commitments to get access to CV deals.

That is the real danger. CVs are being sold as liquidity. In many cases, they are simply private equity selling to itself.

A true exit proves value in the market. A CV can preserve a mark, extend a fee stream, and delay the moment when outside buyers reveal what an asset is really worth.

In sum, PE investors should treat this as another sign of stress across the asset class.

The exit market is being supported by internal transactions, and many aging funds are staying alive through structures that push the reckoning further out.

CVs started as a way to hold on to winners. Now, they are increasingly being used to keep zombie firms afloat.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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