A Continuation Fund is a specialized private equity vehicle established to acquire assets, typically a portfolio of illiquid investments, from an existing, older fund managed by the same general partner. This structure provides liquidity options for existing limited partners while allowing the general partner to continue managing high-performing assets for an extended period, maximizing value realization.
Mechanism
The operational process involves the general partner identifying specific assets from a maturing fund that retain significant growth potential. A new continuation fund is then established, raising capital from both new and existing limited partners to purchase these assets at a valuation determined by an independent third party. This mechanism facilitates a controlled secondary transaction, preventing forced sales of promising assets and allowing for sustained management and value realization over a longer horizon.
Methodology
In crypto investing, continuation funds offer a strategic pathway for venture capital firms to maintain exposure to successful blockchain startups or digital asset protocols whose development cycles extend beyond conventional fund durations. This methodology provides existing LPs with a choice: either liquidate their positions for immediate returns or roll their capital into the new fund for continued participation. It allows the general partner to maximize returns from long-term holdings, supporting ongoing development without premature divestment and preserving strategic positioning.
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