Continuation Funds As A Tool For Creating Liquidity

In recent years, the previously rare continuation funds have become more common as a way to create liquidity in close-ended funds. Continuation funds enable the realisation of an investment in such a manner that the fund manager retains control and has the possibility to benefit from a potential future increase in value of the investment target. In this post, I present some central special characteristics of continuation funds that fund managers and investors should keep in mind.

What Are Continuation Funds?

In an average continuation fund transaction, a continuation fund purchases one or several investment targets in a fund that is managed by the same fund manager and often near the end of its term. Investors of the existing fund have the option to either sell (i.e. redeem) their investment or to transfer it to the continuation fund. Completely new investors pay their commitments to the continuation fund, which provides liquidity for those investors of the