MCAM Group, a placement agent, says that 42% of the world’s private equity firms launched continuation vehicles in recent years
In 2024, global private equity firms created 65 continuation funds (57 in 2023) with aggregate resources of 36 billion US Dollars, an amount close to the 2021 peak of 38 billion, Preqin preliminary data as at 11 December 2024 say.
International placement agent MCAM Group said that 42% of private equity launched continuation funds in recent years and highlighted that the industry is changing its traditional business model with an investment cycle of 5-7 years. Furthermore, 32% of such vehicles owns more than one asset (see here PrivateEquityWIre). Preqin data say that in 2024 32 multi-asset vehicles and 33 single-asset funds were active. In 2021, 55 funds of this kind were operative, 39 (71%) were multi-asset and 16 (29%) single-asset.
Such trend gained momentum as private equity are struggling for disposing their assets at the expected price. The stock markets’ volatility that started in 2021, also drastically reduced the number of IPOs, making it difficult for financial sponsors to fetch a satisfactory amount from exits. The continuation funds allow the investors in previous vehicles to cash their partnerships while other LPs can move their resources in the new platform.
Such vehicles initially gained a reputation as tools for the placement of ‘zombie portfolios’ of troubled assets that could not attract offers. However, Preqin quoted Joseph Smith, co-head of Schulte Roth & Zabel LLP’s Private Equity Funds Group, as saying that investors are currently considering continuation funds a good option as they have firms of good quality. Lars Bjoergerd, a managing director of MCAM Group, added: “The LPs are no longer reluctant as they used to be in investing in continuation funds. Longer holding periods for private equity firms assets can generate better returns”.
In 2024, the number of private equity firms who decided to launch continuation funds hit a peak. North America (34 sponsors) and Europe (20 sponsors) took the lead, Preqin reported.
MCAM Group added that global continuation funds have assets under management worth 60 billion US Dollar, 1.5% of the value of global private equity resources and portfolio assets which are worth in the region of 4200 billion.
BeBeez Magazine issue of 1 March, Saturday, will publish an analysis about the continuation funds.
