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GP-led secondary.

Aka. Continuation fund · Continuation vehicle · CV · GP-led restructuring
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What is a GP-led secondary?

A GP-led secondary is a transaction initiated by the general partner to move one or more portfolio companies out of an existing, usually aging fund and into a newly formed vehicle — a continuation fund. New secondary investors buy into the new vehicle, and the existing LPs of the old fund are given a choice: take cash now or roll their interest into the continuation fund and stay invested.

It contrasts with a traditional LP-led secondary, where a limited partner simply sells its fund stake to another investor without the GP driving the deal. In a GP-led, the manager is the architect — restructuring how an asset is held rather than transferring a passive interest.

The structure has become a mainstream tool, particularly for high-quality assets a GP wants to keep owning past the end of a fund's life, and as a source of liquidity when traditional exits like sales or IPOs are difficult.

How a GP-led secondary works

The transaction typically unfolds as follows:

  1. Asset selection. The GP identifies one or more companies — often the best remaining assets, sometimes a single "trophy" asset — to transfer into a continuation vehicle.
  2. Pricing. A price is set for the assets, usually informed by a third-party valuation and a competitive process among secondary buyers, to address the conflict of the GP effectively selling from one fund to another it controls.
  3. The LP election. Existing LPs choose to cash out at the agreed price or roll their interest into the new vehicle on its terms.
  4. New capital and reset terms. New secondary investors fund the cash-out option and back the continuation fund, which carries fresh economics — a new carry, hurdle, and hold period — and often a reset GP commitment.

Because the GP sits on both sides, governance is central. LP advisory committee (LPAC) approval, independent fairness opinions, and a genuinely market-tested price are the safeguards that keep the transaction defensible.

Why GP-led secondaries are scrutinized

The core tension is conflict of interest: the GP is selling an asset from a fund it manages to a new fund it will also manage, while setting the price and the terms. Done well, it gives liquidity to LPs who want out and continued upside to those who roll. Done poorly, it can hand a great asset to the GP on favorable economics at the expense of cashing-out LPs.

LPs and advisers focus on three things: was the price genuinely market-tested by competing buyers, are the rolling LPs' terms fair relative to the new money, and is the GP crystallizing carry on the transfer in a way that resets its incentives. Guidance from bodies such as ILPA has pushed for clearer disclosure, independent valuation, and explicit LPAC involvement.

Frequently asked.

5 questions
01 What's the difference between a GP-led and an LP-led secondary?

In an LP-led secondary, a limited partner sells its existing fund interest to another investor — the GP is largely a bystander. In a GP-led secondary, the general partner initiates the deal, moving assets into a new continuation vehicle and giving all LPs a cash-or-roll choice.

LP-led is a transfer of a passive stake; GP-led is an active restructuring of how the assets are held.

02 What is a continuation fund?

It is the new vehicle created in a GP-led secondary to hold the transferred assets. It is backed by new secondary investors and any rolling LPs, and it carries fresh terms — a new carry, hurdle, hold period, and often a reset GP commitment. It lets a manager keep owning an asset beyond the original fund's life.

03 Why would a GP do a continuation-fund deal instead of just selling the asset?

Several reasons: the GP may believe an asset has substantial upside left and wants to keep owning it; the original fund may be reaching the end of its life and needs to return capital; or traditional exit routes like a sale or IPO may be unattractive in current conditions. A GP-led provides liquidity to existing LPs while preserving future upside for those who roll.

04 How is the conflict of interest managed?

Through governance and pricing discipline. The price is typically set via a competitive process among secondary buyers and supported by an independent valuation or fairness opinion. The LP advisory committee reviews and approves the transaction, and disclosure standards push the GP to show that cashing-out LPs received a fair, market-tested price.

05 How do firms keep a continuation-fund transaction auditable?

It requires preserving the full record: the valuation evidence, the competing bids, the LPAC approvals, the LP elections, and the carried-interest treatment on the transfer. That record is what demonstrates the price was fair and the process clean if it is ever questioned.

When the deal record stays linked and queryable rather than scattered across closing files, the firm can answer how the asset was priced and approved years after the transaction.

Related terms

Dfund economics

Dry powder

The committed capital a fund has raised but not yet invested — the <em>uncalled</em> commitments it can deploy when the right opportunity appears.

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Cfund economics

Crossover fund

A fund that invests across private and public markets — backing a company in its late <em>private</em> rounds and holding it through and after the IPO.

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Dfund economics

Distribution waterfall

The contractual order in which a fund splits cash from exits between LPs and the GP — return of capital, preferred return, catch-up, then the <em>carry</em> split.

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Mfund economics

Management fee

The recurring fee — conventionally about 2% a year — that funds the GP's operating costs, paid regardless of whether the fund's <em>investments</em> succeed.

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Dfund economics

Deal-by-deal carry

A structure where the GP earns carried interest on each profitable exit, rather than waiting until the whole fund returns capital. The <em>American waterfall</em>.

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Mfund economics

MOIC

Multiple on Invested Capital — total value returned and held divided by capital invested. It answers <em>how many times your money came back</em>, ignoring time.

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