Continuation Vehicles

Liquidity constraints and creative solutions
The private equity industry continues to face significant liquidity challenges. Recent market reports show that distributions as a percentage of net asset value (NAV) have reached an all-time low. In this environment, creative solutions are becoming increasingly important – CVs enable capital flows to investors to be maintained in a tight market environment, while providing optionality for them.

Alternative for management teams and longer holding periods
In addition to the aforementioned benefit as a liquidity option for LPs, continuation vehicles also offer private equity managers and management teams a valuable alternative to conventional M&A processes. Although the execution often takes more time, increasing specialization enables more efficient processes and already entails less “distraction” for management in day-to-day business. At the same time, private equity managers are increasingly focusing on operational value creation in the current macro environment, which is leading to longer holding periods. As a result, it is not surprising that GPs prefer to hold investments longer these days to realize their full potential rather than exiting after four years. Continuation vehicles offer the flexibility needed to realize long-term value appreciation while providing liquidity options for LPs.

Increasing market diversification and future prospects
The secondary market is becoming increasingly diverse. In addition to traditional secondary investors, direct investors and specialized sector players are increasingly entering the market. These new market participants not only provide additional liquidity, but also contribute to the further professionalization and proliferation of the market segment with their innovative strength, ultimately favoring the expected sustained market growth. Significantly larger and more sophisticated structures are also conceivable, with regulatory and market-related developments playing a decisive role.