Why the lower mid-market offers compelling continuation fund opportunities
A headline theme across private markets over the past two years, driven by inflationary and interest rate pressures, has been the slowdown in deal and exit activity.
At the same time, there has been significant attention on the rise in secondaries as an investment theme. The secondaries market recorded $160bn in transaction volume globally in 2024, a new annual record, and is positioned strongly for the coming year.
This reflects the continuation of a longer-term trend: as the private equity market matures and expands, the secondary market has similarly continued to grow and evolve. Demand for liquidity from private equity investors has only increased, driven by the notable decrease in exits and distributions during the past couple of years.
Coinciding with the growth of secondaries has been that of continuation fund transactions – otherwise referred to as ‘GP-led secondaries’ – that enable existing managers to extend the hold period of their highest-quality assets, backed by new capital. Continuation funds have become a key growth driver within the secondary market, accounting for 45-50% of deal volumes over the past several years (see chart).
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