Continuation Funds: Guernsey's Fast And Cost-Effective Solution

This article was first published in the Financial Times.

Against the backdrop of a stagnant IPO market, higher financing costs and dwindling deal opportunities, fund managers are increasingly turning to the divestment of portfolio assets to continuation funds as an alternative means of returning cash to investors.

The establishment of a continuation fund enables managers to transfer one or more portfolio companies to a new entity with an extended investment horizon compared to the original fund. Financing can be sourced from existing investors in the main fund, as well as new third-party investors. Given the urgency often associated with these transactions, there's a strong preference for swift execution, with stakeholders hesitant to bear the costs associated with establishing and operating the main fund.