Private equity firms are increasingly turning to continuation funds to exit ageing investments, with deals totalling $41bn in the first half of 2025 — a record figure that accounted for 19% of all industry exits, according to a report by the Financial Times citing new data from Jefferies.
The surge reflects a broader shift in exit strategies as traditional routes like IPOs and strategic sales remain constrained. Continuation funds – where a private equity manager sells assets from one fund to a newer vehicle it also controls – are becoming a mainstream tool to return capital to investors and crystallise performance fees in a tough liquidity environment.
The $41bn in continuation fund activity marks a 60% year-on-year increase, and underscores how sponsors are adapting to persistent headwinds in public markets and M&A, which has limited distributions to LPs for nearly four years.
Major firms including Vista Equity Partners, New Mountain Capital, and Inflexion were among the most active participants in H1 2025. Vista raised a record $5.6bn continuation fund to recycle a large stake in Cloud Software Group, while Inflexion sold four portfolio companies — including Aspen Pumps and Rosemont Pharmaceuticals — to a new £2.3bn vehicle.
These transactions offer limited partners (LPs) the option to either roll over their investment or cash out, while giving general partners (GPs) continued ownership of prized assets — often beyond the typical 10-year fund life. GPs benefit from new fee streams and the ability to lock in carried interest, even amid liquidity pressures.
In total, the secondaries market surpassed $100bn in volume during the first half of the year, nearly half of which came from LP-led sales.
While these vehicles offer flexibility and time extension for high-conviction holdings, a report from Bain & Co found that nearly two-thirds of LPs still favour conventional exits via M&A or IPOs. Only 17% preferred continuation fund exits.
