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Selling to Yourself: Continuation Funds in Private Equity

Author

Listed:
  • Rustam Abuzov
  • Will Gornall
  • Sophie Shive
  • Ilya A. Strebulaev
  • Michael S. Weisbach

Abstract

Continuation funds (CFs) are private equity structures in which a manager raises a new fund to purchase assets from their existing fund. This structure has surged in popularity, from five funds in 2018 to 130 in 2024. We use a hand-collected sample of 472 CFs to test a model in which heterogeneous preferences drive CFs. Consistent with the model’s predictions, CFs emerge when LPs are more heterogeneous and managers have earned carried interest that they can roll. LPs typically choose to exit rather than invest, with this decision driven by both LP-level frictions and time varying LP liquidity demands.

Suggested Citation

  • Rustam Abuzov & Will Gornall & Sophie Shive & Ilya A. Strebulaev & Michael S. Weisbach, 2025. "Selling to Yourself: Continuation Funds in Private Equity," NBER Working Papers 34471, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34471
    Note: CF
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    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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