The following is a guest post from Alexander Stacy, partner at Hudson Hill Capital. Opinions are the author’s own.
Continuation vehicles were for many years PE’s version of a used car lemon: They looked fine when presented to prospective buyers, but the seller knew what was wrong under the hood.
But the rise of PE secondary market-focused investors — highlighted by Swedish PE firm EQT’s recent $3.7 billion acquisition of secondary market leader Coller Capital — shows how and why continuation vehicles have been transformed from lemons into something much sweeter for the PE industry.
London-based Coller, with $50 billion under management, was founded in 1990 and has been instrumental in creating the increasingly efficient institutional secondaries market. By professionalizing and formalizing investment diligence and valuation processes for proposed CVs, it helped turn what had once been the refuge for troubled assets and underperforming portfolio companies into an important tool in the PE ecosystem.
The combination of a major PE firm with the market-leading secondaries platform marks a shift in how the industry views secondary transactions. Where continuation vehicles once signaled weakness on the part of the sponsoring general partner, they now more often indicate investment success — and EQT has made a multi-billion dollar bet that the trend will continue.
CVs allow a PE firm to hold a portfolio company longer while giving existing LPs the option to cash out or roll their stake into the new vehicle. But CVs carried a stigma when the secondary market emerged: The information asymmetry between sponsor and investor made them the tool of choice for troubled funds nearing their termination date that needed more time to salvage underperforming positions.
That contributed to a core conflict of interest: the fund GP serves as the fiduciary for both the continuation fund (buyer) and legacy fund (seller). The GP also has strong financial incentives to launch the CV, like ongoing management fees, improved economic terms, and the possibility of raising its equity stakes in assets it believes will outperform.
But the new wave of institutional secondary investors performed a critical function that began to turn that dysfunctional market into a highly functional one: Their professionalized diligence and independent valuation work leveled the information asymmetries inherent in a CV offering, allowing sponsors and new investors to reach arms-length pricing and deal terms.
With PE fund holding periods on the rise and attractive exits via public offerings growing scarcer, the desire to hold strong assets for longer periods also began to change the composition of CV portfolios.
Firms like Coller began actively partnering with leading PE sponsors to provide liquidity to early investors in standout portfolio companies. This new wave of CVs ran counter to the traditional story behind such secondary offerings, again changing perceptions for investors and sponsors alike.
This evolution directly addresses the classic ‘market for lemons’ problem identified by Nobel Prize-winning economist George Akerlof. In secondary transactions, GPs possess far superior information about underlying asset quality than potential buyers. Without credible verification, buyers assume any asset offered is a lemon and seek to discount it heavily, deterring GPs from placing high-quality companies in continuation vehicles.
But by conducting independent, rigorous diligence and systematically rejecting laggards and seeking to back only trophy assets, specialist secondary firms like Coller have effectively screened out the adverse selection problem. As a result, continuation vehicles have shed their historical stigma and now serve as a legitimate mechanism for extending hold periods on the very best portfolio companies.
According to investment bank Jefferies, the secondary market in PE has exploded, with total secondary transaction volume reaching $162 billion in 2024. That marks a 45% increase from 2023, with GP-led continuation vehicles at roughly $75 billion.
The number of CV transactions is also skyrocketing, accounting for approximately 19% of all private equity asset sales in the first half of 2025, a 60% increase over the first half of 2024.
KSL Capital’s 2024 continuation vehicle for Alterra Mountain Company — the ski resort operator behind Mammoth, Deer Valley, and Palisades Tahoe — illustrates the shift. KSL raised more than $3 billion from pension funds, sovereign wealth funds, and endowments to extend its ownership of a company it had spent years building.
A more liquid PE ecosystem seems to be benefiting all participants. With CVs, LPs who need liquidity can get it. New investors can obtain a de-risked entry into a proven asset with a decade of operating history behind it. Portfolio companies get stable ownership and fresh capital.
Instead of buying time, the new, more robust CVs let all participants buy into the pursuit of upside.
When the market leader in independent secondaries diligence gets absorbed into one of Europe’s largest PE firms, it signals that CVs are no longer a contingency plan — they’re a viable, planned exit route, built into the way sophisticated sponsors think about portfolio lifecycles.
