What should an investor verify first?

Whether an independent fairness opinion validated the price offered for the sell-or-roll decision.

Which documents matter most?

The fairness opinion, if obtained, and the new continuation vehicle's fee and carry terms.

How should the final decision be made?

Compare the new vehicle's terms to the original fund before choosing to roll forward rather than take cash.

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Continuation Funds Explained

Q: What is the main downside to test?

The manager's structural incentive to price the transaction favorably to itself, given continuing fee income.

Aryan Singh1 min read

Understanding the Secondary Transaction

A continuation fund is a new vehicle a manager creates to hold one or more assets from an existing, maturing fund, giving investors the choice to sell their interest for cash or roll it forward into the new vehicle for continued exposure — typically used when a manager wants more time with a strong-performing asset than the original fund's life allows.

Reading Price, Portfolio and Obligations

The price offered to selling investors is meant to reflect fair value for the asset being moved, ideally validated by an independent third-party fairness opinion and, in stronger processes, a competitive bidding process among multiple potential buyers, not a single price set unilaterally by the manager.

Where Secondary Liquidity Breaks

The structural conflict is real: the manager benefits from continuing to earn fees and carry on the asset in the new vehicle, which creates an incentive to price the transaction favorably to itself rather than to the investors choosing to exit. Investors rolling forward should also understand the new vehicle's fee and carry terms may differ from the original fund's.

Making the Purchase or Sale Decision

Before deciding to sell or roll forward, confirm: whether an independent fairness opinion validated the offered price; whether a competitive process was run or the manager set price unilaterally; how the new vehicle's fee and carry terms compare to the original fund; and whether selling investors receive cash on the same terms as any new outside investors entering the continuation fund.

A continuation fund can be a legitimate way to hold a strong asset longer, but the manager's conflict of interest requires independent price validation before an investor decides whether to sell or roll forward.

Key takeaways

A continuation fund moves assets from a maturing fund into a new vehicle, giving investors a sell-or-roll choice.
Managers benefit from continuing fees on the asset, creating a real pricing conflict of interest.
Look for an independent fairness opinion and, ideally, a competitive bidding process behind the offered price.
Confirm the new vehicle's fee and carry terms before choosing to roll forward rather than sell.

More in Private-Market Secondaries and Liquidity

Continue with the other chapters in this module.

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