The reputation of continuation funds has undergone what the CFA Institute calls a “remarkable transformation,” evolving from once-derided “zombie vehicles” into a critical source of liquidity in private markets. In its new study, Continuation Funds: Ethics in Private Markets, the organization notes that deal volume for these structures reached an estimated $63 billion in 2024, as demand for liquidity surged amid a sharp slowdown in traditional exits. 

With mergers, acquisitions, and IPOs scarce, private equity buyout funds globally are holding an estimated 29,000 unsold portfolio companies valued at $3.6 trillion, according to Bain & Company data cited in the report. This backlog has left distributions to limited partners at their lowest level in more than a decade, driving GPs to embrace continuation funds as a way to crystallize returns and keep capital moving. Once viewed as a vehicle for struggling assets, continuation funds are now seen as repositories for firms’ “trophy assets.” 

“Continuation funds are designed to give investors choice: Those who want liquidity can cash out, and those who want to continue their investment can roll over into the new continuation fund,” said Stephen Deane, CFA, senior director of capital markets policy at CFA Institute and lead author of the report. 

Still, the structures raise thorny governance challenges. The CFA Institute cautions that GPs sit on both sides of these deals, often resetting carried interest, extending fee streams, and potentially improving legacy fund track records in ways that may not align with investor interests. “Many investors are happy to take the money, but some dismiss continuation funds as merely a transfer of economic benefits to the fund managers,” Deane noted. 

The CFA Institute’s report underscores the dual reality: continuation funds are solving a liquidity crunch for private markets while introducing heightened conflicts of interest that require robust oversight, transparency, and investor diligence.