Private equity has found a way to hand cash back to its investors without selling the companies it owns, and it has grown into one of the market’s defining features. When a manager holds a strong business but the market for outright sales is slow, it can move that company into a new fund it also runs, known as a continuation vehicle. The original investors then choose to take their money out or stay invested, and the manager keeps hold of the asset.
The idea has gone from the margins to the mainstream at remarkable speed. Most of the largest buyout firms have now used it, and the deals involved run to billions. For investors waiting on returns, and for managers reluctant to sell good companies cheaply, it has become the answer to a shared problem. Gone is the model of just buying a company, holding it and selling it years later, liquidity is now something managers actively create. It is an idea that is changing the way the whole asset class operates.
A sale without selling
An ageing fund nears the end of its life still holding a company the manager rates highly and would rather not sell into a weak market. The manager sets up a new vehicle, moves the company into it, and brings in fresh money from new investors. That new money pays out the original investors, who can either take the cash or roll their stake into the new vehicle and stay on for the next chapter.
It keeps a prized asset in its hands, brings in new capital to fund growth, and buys more time to build value before any eventual sale. The investors, for their part, get real cash back at a time when sales and stock market listings have been thin. Both sides get what they want, and the company never changes hands on the open market.
What investors want now
The force behind all this is a simple demand for cash. A slow market for company sales and listings left many funds holding valuable businesses but returning little money to the investors whose capital was tied up. These investors, from pension funds to endowments, increasingly judge a manager on cash actually returned, a measure known as DPI, ahead of paper valuations that cannot be spent.
Investors have held back from backing new funds until they see cash come home from the old ones, and for every three pounds a manager hopes to raise, only about one is available today. A McKinsey survey found that two and a half times as many investors now rank cash returned as their top measure compared with three years ago. Handing money back has become the priority, and the continuation vehicle is one of the fastest ways to do it.
A record year for secondaries
The wider secondary market, which covers all trading of existing fund stakes, hit a record of around $226 billion in 2025, up more than 40% on the year before. Deals led by the managers themselves, the general partners, reached a record of roughly $106 billion, and continuation vehicles now make up the large majority of that activity.
Vista Equity Partners moved its software business Cloud Software Group into a continuation vehicle worth around $5.6 billion, the largest of its kind, while New Mountain Capital used a roughly $3 billion vehicle to keep the healthcare marketing group Real Chemistry. European firms have joined in too, with the likes of CapVest and Norvestor completing sizeable deals of their own. Continuation vehicles accounted for around 16% of all private equity exits last year, and some forecasts see that reaching 30% to 40% within two years.
A win for both sides
The structure works because it brings together interests that once pulled apart. A manager forced to sell a strong company early, purely to return cash, gives up the future gains that patient ownership might capture. A continuation vehicle takes that pressure away, letting the manager keep building the business while still paying out investors who want their money now. Fresh capital can then fund the acquisitions or expansion the original fund had no room for.
Investors get a real choice they did not have before. One who needs cash can take it at a tested price, while one happy to stay can back a company they already know, often among the manager’s strongest performers. The option to roll over means an investor need not pick between cash and staying invested, and can even split the two. That flexibility is a big part of why most major buyout firms have taken up the tool.
In a continuation deal the manager sits on both sides, selling the company out of the old fund while buying it into the new one, which puts real weight on how the price is set and the process run. The market has answered with clearer standards, including independent valuations, competitive checks on price and the expectation that managers keep their own money invested alongside investors.
How well that tension is handled varies from deal to deal. The strongest processes give investors the time and information to weigh the choice, and test the price against the open market so the figure holds up. It is the point on which the whole idea is judged, and the reason governance sits at the centre of the debate around it.
A new way into the best assets
This has opened a route into private markets that barely existed a decade ago. Buying stakes through continuation vehicles and secondary deals lands an investor in mature, cash-generative companies that are already proven, not a blind pool of businesses a fund has yet to buy. The assets often change hands below their underlying value, and the wait for returns is shorter, because the companies are already years into their growth. Continuation vehicles hold a particular draw, since managers tend to move their strongest performers into them, so the companies on offer are frequently the ones a firm least wants to let go.
Dedicated secondary funds hold an estimated $315 billion ready to invest, more than ten of them running to over $10 billion each, and buyers have competed hard enough to push prices for the best assets close to full value. That weight of money reflects a simple view, that these are among the most attractive ways into private markets on offer today.