Private equity executives speaking at a Hong Kong summit defended continuation vehicles as vital tools for navigating a difficult initial public offering market. Proponents emphasized that independent valuations and advisory approvals mitigate inherent conflicts of interest while offering investors a clear choice to exit or reinvest. Hamilton Lane highlighted that rolled assets have historically achieved average money multiples of around four times, outpacing top-quartile buyout benchmarks. Industry leaders added that elevated borrowing costs are reinforcing the need for hands-on operational improvements to generate value.
Key points
Private equity executives rely on continuation funds to supply crucial liquidity while pu…: Private equity executives rely on continuation funds to supply crucial liquidity while pushback persists over potential conflicts of interest.
Rigorous governance mechanisms like third-party valuations and advisory committee approva…: Rigorous governance mechanisms like third-party valuations and advisory committee approvals are critical to justifying continuation fund transactions to investors.
Sustained high interest rates are driving private equity firms away from financial engine…: Sustained high interest rates are driving private equity firms away from financial engineering and toward active operational value creation.
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(Bloomberg) -- Global private equity executives are pushing back against investor skepticism over continuation funds, mounting a defense of the increasingly popular structure at Hong Kong’s flagship investment summit on Wednesday.
“There are a lot of haters in the LP community,” said Jonathan Sokoloff, managing partner at Leonard Green & Partners, acknowledging persistent resistance from limited partners. “But it’s here to stay.”
The comments come as continuation funds have grown into an increasingly important source of liquidity, particularly after a difficult few years for exits through initial public offerings. The vehicles allow private equity firms to hold promising portfolio companies for longer, giving them more time to create value, but remain contentious because of potential conflicts between general partners rolling assets into new vehicles and existing investors seeking an exit.
Hamilton Lane co-CEO Juan Delgado-Moreira defended the structure, describing continuation vehicles as a “La La Land” for private markets, where investors can either realize value or remain invested. He said third-party valuations and approvals from investor advisory committees help address governance concerns.
Delgado-Moreira pointed to their historical performance, saying assets…
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