Redefining private equity: How continuation investments are disrupting the buyout market
Our forecasts show that the market for continuation investments, also known as GP-led secondaries, is set to more than quadruple over the coming decade, driven by a combination of buy-side demand and structural supply-side growth drivers.
Autheurs
Key takeaways:
- Market growth outlook. Our central forecasts suggest the size of the continuation investment market will quadruple from around $70 billion to more than $300 billion in the next decade, cementing its role as a key engine of value creation and liquidity generation in private equity.
- Structural vs. cyclical drivers. The strong growth of continuation investments reflects a profound structural shift. Our research indicates that more than 80% of the 2024 transaction volume for continuation investments is driven by structural growth, not cyclical effects.
- Appeal to investors. Investor demand for continuation investments is being driven by the prospect of reduced risks and more predictable returns, faster liquidity (about 25% shorter holding periods) and lower fees (about half) compared to traditional buyouts.
- Disruption lies in who retains ownership. The most significant disruption is not in the concept of holding companies for longer under private equity ownership, but rather in who retains ownership.
- Displacing deal flow. Continuation investments partially displace secondary buyouts (one fund manager selling to another); we estimate this will in turn displace around 8% of total deal flow for mid and large buyouts over the next 10 years. In response, larger buyout and traditional secondary managers are launching dedicated continuation investment funds, providing further buy-side capital to fuel growth.
Once a more exotic tool in the broader private equity toolkit, continuation investments have emerged as one of the most dynamic and hotly debated developments in the market.
A growing cohort of private equity managers are seeing the potential of these transactions to continue the transformation – and realise the full value creation potential – of key portfolio companies without a disruptive change of ownership. In the process they team up with lead underwriters (new investors) to inject fresh capital and offer a valuable, faster liquidity option to existing investors.
As such, continuation investments are catalysing a fundamental reconfiguration of how value is generated and realised in buyout investing. Continuation investments can push influence upstream to lower mid-market managers, who can stay in control of their prized assets for longer; provide more continuity and fresh capital to portfolio companies to accelerate growth; and provide more attractive terms to lead underwriters and other new and existing (rolling) investors, compared to traditional fund-to-fund sales (also known as secondary buyouts).
Market expansion
In 2024, continuation-related buyout and growth capital exit value reached close to $45 billion, representing around 7% of distributions. When including the new capital being injected in such transactions, as well as continuation investments outside of buyout and growth capital (including venture capital, private debt, infrastructure and others), total transaction volume set a new record in excess of $70 billion.
Some commentators have suggested that the growth of continuation investments is merely cyclical, driven by a temporary downturn in traditional exit routes against a challenging macroeconomic and market backdrop. Our analysis challenges this narrative.
Our calculations, which compare combined secondary buyout and continuation investment volumes over time with the expected volume if the market had followed its long-run growth average, show that the cyclical tailwind for continuation investments contributed about 17% of the transaction volume in 2024. Overall, the compound annual growth of these deals between 2013 and 2024 stands at 27%.
These figures evidence that continuation investments are not simply a stopgap, they are a disruptive force that is reshaping the architecture of private equity – and we expect their growth trajectory to continue.
Most of the growth of continuation investments is structural, not cyclical
Past performance is not a guide to future performance and may not be repeated. Pitchbook, Preqin, Jefferies, Greenhill, Evercore, Lazard, PJT, Schroders Capital, 2025. Buyout distributions estimated averaging yearly values from Pitchbook and Preqin. Continuation investments exit value estimated using averaged yearly values reported by Jefferies, Greenhill, Evercore, Lazard and PJT, including only buyout and growth strategies globally and excluding structured transactions and unfunded commitments in continuation vehicles. Cyclical component calculated by correcting historical values for excess of buyouts plus continuation investments pool above historical secondary buyouts average of 36%. Forecasts and estimates may not be realized. The views shared are those of Schroders Capital and may not be verified.
What is driving the growth of continuation investments?
In our view there are five key structural factors that are driving the growth of this segment, reflecting a combination of long-term market evolution and short-term dynamics:
1. Continued private equity ownership beyond the original holding period is an established way to drive company transformation
The concept of businesses remaining in the private equity ecosystem after the original holding period is not new. Fund-to-fund transactions – also known as secondary buyouts, where one fund manager sells a portfolio company to another – have averaged 38% of deal count and 36% of deal value since 2006.
2. Continuation of company transformation under private equity ownership often does not require a new owner
Our analysis of ~2,600 realised buyout deals in the Schroders Capital database shows that about 31% of all buyout portfolio companies are potential candidates for continuation investments. This reflects the proportion of deals that had a return profile similar to what we see for continuation investments and that generated more than a 2x multiple on invested capital (typical minimum target return for both secondary buyouts and continuation investments).
3. Continuation investments are a cost-effective way to continue company transformation
Market pricing data and analysis from Preqin suggest that management fees on continuation vehicles are roughly half of those of traditional buyouts. Carried interest is also typically structured in tiers, meaning the overall fee burden is lower. Based on 2024 volumes, the total aggregated investor savings over a four-year hold period compared to traditional buyouts would amount to approximately $3.8 billion.
4. Continuation investments have more predictable returns and generate faster liquidity
More predictable returns: The return profile of continuation investments has historically been statistically more stable than that of traditional buyouts. Since managers continue to own their successful companies where no change in control is needed, such investments naturally mitigate risks associated with investing in unknown companies.
Faster liquidity: Continuation vehicles tend to deliver liquidity faster than other buyout investments. On average, they have a 1.5-year shorter hold period (less than three years instead of more than four years), which translates to a 25% faster time to liquidity for investors.
5. A cyclical exit downturn has increased the availability of continuation opportunities
As noted above, the cyclical tailwind for continuation investments contributed about 17% of the transaction volume in 2024.
Explosive growth to continue: Continuation market to quadruple in size
The continuation investment market’s recent growth trajectory shows no sign of slowing. Based on Schroders Capital’s conservative projections, rooted in increasing market penetration of continuation investments, growth in broader private equity NAV (net asset value – the total value of assets held, minus liabilities), and anticipated overall recovery in distributions, we forecast more than fourfold expansion in continuation investments over the next decade.
Specifically, in our base case forecast we expect total continuation investment volumes to increase from a little more than $70 billion in 2024 to more than $300 billion by 2034.
Continuation investment market to more than quadruple in size by 2034
Past performance is not a guide to future performance and may not be repeated. Source: Pitchbook, Preqin, Jefferies, Greenhill, Evercore, Lazard, PJT, Schroders Capital, 2025. Includes buyout and growth strategies globally, excludes structured transactions and unfunded commitments in continuation vehicles. Continuation investments’ growth as % of buyout distributions modelled using a sigmoid function with saturation point at 13% in 2045. Grey bars show delta between reported secondary transaction value and exit value attributed to buyout continuation investments (consisting of fresh capital and continuation investments for strategies other than buyout), the average of which we have applied to forward-looking forecasts to generate a total forecast value. Assumptions: 50% Preqin’s forecasted NAV growth until 2029 (50% of CAGR thereafter), distribution rate returns linearly to 20% in 2027. Forecasts and estimates may not be realised. The views shared are those of Schroders Capital and may not be verified.
Under a more conservative low case for continuation investment market growth, we still expect the total size of the market to triple over the coming decade, while under more optimistic assumptions the growth of the market could as much as sixfold. See the full paper for further details of the low, base and high case forecasts.
Disrupting the buyout model
The rise of continuation investments is not only altering how assets are exited (for those investors who opt to cash out), it is actively reshaping the private equity buyout model itself. As noted above, the most profound disruption is not in the concept of holding companies longer under private equity ownership. Rather, it lies in who retains ownership.
Instead of selling from one fund manager to the next (typically a larger one), more assets are remaining with the same fund manager, supported by a continuation vehicle and, typically, a new influx of capital. This allows continued implementation of a proven company transformation and growth plan.
This displacement of deal flow disrupts part of the buyout market, especially for mid and large buyouts. Over the past two decades, those strategies have increasingly depended on fund-to-fund transactions as their primary deal source, representing more than half of their new transaction volumes (see chart below).
Based on our forecasts of continuation market growth, we estimate that about 8% of all mid and large buyout deal flow could be displaced over the next 10 years, compared to where it would be otherwise. See the full paper for details on this analysis.
Mid and large buyouts are more dependent on secondary buyouts
Past performance is not a guide to future performance and may not be repeated. Source: Unquote, Schroders Capital, 2025.1Deals with an enterprise value of <€100m 2Deals with an enterprise value of >= €100m and <€1,000m 3Deals with an enterprise value of >= € 1,000m. Note: Based on transaction value; Includes all completed buyout an growth transactions globally. Excludes VC-backed exits. Headline figures are value-weighted averages for 2015-2024.
Such a shift will have a significant impact on larger buyout managers and secondary firms, given that large secondary transactions typically focus on large buyout funds. These groups have taken notice, with more and more such firms now raising dedicated continuation investment strategies. That trend is in turn fuelling further momentum in capital availability for continuation investments that will provide an additional tailwind for transaction volumes in 2025 and beyond.
Subscribe to our Insights
Visit our preference center, where you can choose which Schroders Insights you would like to receive.
Autheurs
Topics