Continuation Fund Structuring And Terms

Introduction

Secondaries have long presented an attractive route to liquidity for limited partners (LPs). Increasingly, general partner (GP) led secondaries are also becoming an effective tool in sponsors' portfolio management toolkits. Continuation funds now account for the vast majority of transactions in the GP-led secondary market. However, as these funds have evolved from a niche to a widely deployed strategy, they have also become more complex. To successfully navigate this complexity, sponsors must get to grips with a number of legal and commercial considerations at the very outset of a continuation fund transaction.

Structuring of GP-led secondaries

GP-led secondaries represent a departure from the 'traditional' LP-led secondary, which provide a liquidity solution for LPs seeking to exit their existing interest in a fund, but which are of limited strategic value to sponsors. GP-led secondaries are typically structured in one of three ways.