The continuation vehicle (CV) market now accounts for nearly 50% of all secondary transactions, according to the latest Morgan Lewis Continuation Vehicles Report 2025, which highlights key trends in legal terms and provisions.
The report, which analysed 44 GP-led continuation vehicles launched between Q1 2024 and Q1 2025, ranging from $110m to $3.2bn in size, reveals a significant trend towards management fees converging around 1% or lower. This shift is driven by growing investor pressure on sponsors to reduce fees, changing market conditions, and heightened competition in the GP-led secondary space.
Notable findings include that 90% of CVs imposed a cap on organisational costs and expenses, 80% of CVs covered lead investor expenses on a capped basis, and 93% of CVs had no cap on operational costs. Additionally, 75% of CVs included a tiered waterfall structure with “super carry,” with carried interest ranging from 10% to 30%.
The report also identified trends in follow-on investments, with 84% of CVs prioritising the use of unfunded commitments to support future investments, locking in capital for future operational or acquisition opportunities that could enhance value.
Regarding term lengths, 50% of CVs set an initial term of five years, with 88% allowing for the possibility of a two-year extension beyond the initial period.
