Exit, Voice and the Continuation Fund

Deep Dive: Exit, Voice and the Continuation Fund

A fund manager wants to keep holding its companies. Some of its investors want their money back. A continuation fund can accommodate both: the manager moves holdings into a new vehicle it also runs, and existing investors choose whether to take cash or roll into the new fund.

For limited partners, the decision depends on the price, the new terms and their ability to question either before choosing. As these deals become a more common route to liquidity, they raise a question the economist Albert Hirschman explored decades ago: when people have a way to leave, what happens to their incentive to speak up?

Fund managers led roughly $62 billion to $65 billion of first-half secondaries

Evercore counted $121 billion of secondary volume in the first half of 2026, up 19% from a year earlier. Of that, $65 billion was GP-led, up 35%, and $56 billion was LP-led, up 4%. Jefferies counted $118 billion in total and $62 billion GP-led. The two firms measure the market differently, so the figures differ.

Single-asset continuation vehicles, where a manager moves one company into a new fund, accounted for $34 billion of Evercore’s total, up 88% and 53% of GP-led volume. Jefferies put continuation vehicles at 89% of GP-led volume and 14% of sponsor-backed exit volume, and called them “cemented as a mainstream sponsor-backed exit option.” S&P Global Market Intelligence, citing Preqin, reported that private equity continuation funds raised $62.67 billion in 2025, the most since at least 2017.

Evercore attributed single-asset volume to “sponsors wanting to extend ownership of their highest-conviction assets,” per PitchBook. Private Markets Insights put it more bluntly: the secondaries market “has stopped being a discount venue for distressed sellers and become the primary exit mechanism for sponsors who cannot or will not sell into the M&A market.” Much of this data covers buyout funds, and Augment trades venture-backed company shares, so the figures may not describe venture directly. The Next Web reports that venture-led secondary deals reached $35 billion in 2025, roughly double the 2023 figure.

Reported private-company financials and secondary-market indications may be unaudited, incomplete, non-standard, or based on limited transaction activity. They should not be relied upon as fair value, executable pricing, or a basis for any investment decision.

An economist’s three options map onto the choice a continuation fund puts to LPs

In 1970 the economist Albert Hirschman described what members of a declining organization can do. They can leave, which he called exit. They can try to fix it, which he called voice and defined as “any attempt at all to change, rather than to escape from, an objectionable state of affairs.” Or they can stay out of loyalty and, in his words, “suffer in silence.”

A continuation fund puts all three in one election. Selling is exit. Rolling is staying, on new terms. Voice is the vote of the existing fund’s advisory committee, the negotiation over fees and carry, and the election itself.

Hirschman’s less comfortable point was that the availability of exit may weaken voice. “Those customers who care most about the quality of the product,” he wrote, “are apparently likely to exit first.” Applied to a continuation fund, the limited partners best equipped to judge the price may be the ones who take the cash, which would leave the vote to those with less information or less appetite to contest it.

The participation numbers fit it without proving it. Jefferies reported that LP rollover participation in continuation vehicles averaged 14%, which means most investors took the exit.

A Delaware Court of Chancery complaint filed in late 2025, described by Mayer Brown, shows what weak voice can look like. A sovereign wealth fund alleged that “only three of the fund’s 43 LPAC members voted to approve the transaction, with the majority abstaining,” that LPAC members had about 20 minutes for questions, and that there was no option to stay in place. It also alleged the GP told the advisory committee there were no viable IPO or M&A exit prospects while showing prospective continuation-fund investors the IPO upside. These are allegations, and the case is unresolved. An abstention is also a quiet version of what Hirschman called loyalty.

Venture LP stakes priced at 79% of NAV while most single-asset continuation deals priced at or above it

Pricing is where exit and voice meet. Jefferies reported that LP portfolios sold at 87% of net asset value across strategies in the first half, with buyout at 91% and venture at 79%. Evercore reported that 86% of single-asset continuation deals priced at or above NAV: 71% at par and 14% above.

An investor who sells a stake alone, which is exit with no vote attached, may therefore receive a discount, while a deal organized by the manager may price near the manager’s own mark. The comparison has limits. The pools differ, because LP-led sales are diversified stakes and single-asset deals are one company. The Evercore figure is not venture-only. The manager chooses which asset to move, and by Evercore’s account it is the highest-conviction one. The buyer is selected by the seller’s own manager, and NAV is the manager’s valuation.

One interpretation worth tracking: a continuation fund priced at par may confirm a manager’s mark, although a price agreed between a buyer and a seller’s manager may not be executable or representative of fair value for other holders of the same company.

Caldwell Partners reported in its midyear liquidity report that GP-led deals were 55% of secondary volume in the first half, that the average GP commitment to a continuation vehicle was about 11%, and that GPs rolled 90% or more of their realized carry in 85% of deals. Private Markets Insights reported “super carry,” a higher carried-interest share above return thresholds, in 35% of GP-led deals. GPs are both investing alongside LPs and being paid more if the vehicle performs, which is the conflict ILPA’s guidance is designed to manage.

ILPA’s June draft would add 30 business days and a “remain in place” option

The Institutional Limited Partners Association proposed updated continuation-vehicle guidance in June. Kirkland & Ellis summarized the changes. The minimum election period would rise to 30 business days, from a current market standard of 20. LPs would gain an option to remain in place in the existing fund, along with free choice over partial sell and roll splits. The existing fund’s advisory committee would meet without the GP present, and GPs would run “targeted processes across broad buyer sets with sufficient competitive tension.”

The draft also restates a standard: rolling LPs should be “no worse off” than if the continuation vehicle had not occurred. Mercer Capital quotes the draft as saying LPs “should not be asked to rely solely on NAV, a single lead bid, or a fairness opinion without additional context.”

In Hirschman’s terms, ILPA is trying to put structure around voice. Kirkland notes one limit: the draft says advisory committee members “should be generally understood not to have a fiduciary duty to the fund beyond the duty to act in good faith.” Voice also costs time. Ten more business days in an election period lengthens every deal, and the draft is a proposal that may change.

Caldwell calls secondary liquidity “a core design principle”

Caldwell wrote that “secondary market liquidity has moved from an occasional tactical fix to a core design principle,” and that “liquidity programs created the most value when stakeholders knew they would recur.” Jefferies reported that annual distribution yield from LP portfolios stayed near 10% in the first half, against a historical average of 25% since 2001.

Three effects on private markets may follow, though each is an interpretation. First, a continuation-fund price may become a reference point for later indications on the same company, although those indications may not be executable or representative of fair value. Second, highest-conviction holdings may move into vehicles run by the managers who already hold them, which could keep those shares away from the platforms where individual accredited investors trade. Third, liquidity is becoming a scheduled service that managers provide, with a vote attached.

Most LPs took the cash, and the cash may have been the point

The case for the structure is plain. Jefferies reported that 45% of LP sales were made to generate liquidity, and distributions have run at less than half their historical rate. A continuation fund that prices at or above NAV and offers a roll option gives an investor cash or continued exposure. If the exit pays, the quality of the vote may matter less to the people who take it. Caldwell also reported that LPs “maintained a standing sell/hold/roll framework for GP-led deals that tested each option,” and the average GP commitment of about 11% is capital at risk alongside theirs.

What the first-half reports do not show is whether independent buyers would have paid the same prices. ILPA’s draft would require an anonymized summary of final-round bids, which would give limited partners that comparison.

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📈 Data Point of the Day

10% vs. 25%

Jefferies reported that annual distribution yield from LP portfolios stayed near 10% in the first half of 2026 and has stayed below 20% since the beginning of 2023, against a historical average of 25% since 2001. Distribution yield measures cash returned to investors as a share of portfolio value, and definitions may vary by data provider.

🎓 Manual

Super Carry 🏆

In some continuation vehicles, a manager may earn a larger share of profits once the vehicle passes set return thresholds, an arrangement sometimes called super carry. Terms may differ across deals, and the structure is one of the conflicts that LPs and advisory committees review when they evaluate a manager-led transaction.