Continuation Funds: When Fund Managers Become Both the Buyer and the Seller

Continuation Funds: When Fund Managers Become Both the Buyer and the Seller

Venture funds are built to have a shelf life, usually around ten years, after which the fund’s assets are supposed to be sold and the money returned to the people who backed it.

Continuation funds offer a way around that clock. A general partner picks the fund’s best-performing company, moves it into a brand-new vehicle they also manage, and gives existing investors 20 to 30 days to either cash out or roll their stake into the new fund.

The General Partner Sits on Both Sides of The Transaction

They decide which asset gets sold, set the terms investors have to evaluate under a tight deadline, and continue collecting fees and carried interest on the same company in its new home. Single-asset continuation vehicles, the most conflict-prone version, made up more than half of all such deals last year, with average deal size climbing toward $900 million.

Defenders argue the structure gives genuinely strong companies more runway when public markets and acquirers aren’t buying, and that independent secondary buyers do real diligence before agreeing to a price near the company’s paper value.

That’s true, but it doesn’t remove the asymmetry: the manager who wants to keep managing a hot asset is also the one recommending its price, and investors who don’t roll are left holding whatever’s left in the old fund.

For limited partners with capital tied up in aging venture vehicles, the practical move is simple: ask early, ask often, and read the fine print on fee resets before the decision clock starts.