Perspectives

The Evolution of Continuation Vehicles

A continuation vehicle (“CV”) is a newly formed investment fund that allows a general partner (“GP”) to transfer assets into a new structure to extend the investment horizon while offering liquidity to existing limited partners (“LPs”).

When forming a CV, LPs are typically given the option to either cash out by receiving their share of net proceeds, or to roll their interest into the continuation fund. The GP typically contributes capital by rolling any crystallized economics and in some cases an additional new GP commitment, to support the transaction alongside the secondary buyer.

Assets are then contributed into the newly established continuation vehicle, where the GP, secondary buyers and any rolling LPs become the new investors. The process is typically facilitated by an appointed advisor and priced through a competitive process.

Continuation vehicles were originally used by more established secondary asset classes, such as private equity, as a solution to address hard-to-exit positions, and have since evolved into a strategic liquidity tool, allowing managers to hold high-performing assets for longer, align incentives, and preserve upside. As traditional exit paths have slowed and Distributions to Paid-In Capital (“DPI”) ratios compressed, CVs are becoming an attractive solution for liquidity management. Today, they represent a core component of the secondaries ecosystem, at approximately half of the $226 billion total secondary transacted volumes in FY 2025.¹

Adoption in Private Credit

Trends from private equity and other scaled asset classes are increasingly shaping the credit secondaries market, leading to an accelerated adoption of continuation vehicle transactions as the market embraces the same technology.

Private credit funds’ structure—typically built around an eight-year term and four-year investment period with recycling provisions—means many funds still hold significant unrealized value towards the end of their life.

This dynamic paired with years of muted M&A and refinancing activity, has led to slower DPI progression in many private credit funds, despite the attractive returns and yields of these strategies to date. As shown in the chart below, we estimate 2019 vintage private credit funds have an average DPI multiple of ~0.7x, indicating that investors have received only ~70% of invested capital in these funds to date.²

Private Credit DPI Multiple by Vintage²

Continuation vehicles offer a strategic solution for both GPs and LPs: unlocking liquidity for LPs, enabling GPs to partner on new opportunities, and extending exposure to performing portfolios—enhancing both capital efficiency and return potential.

Additionally, CVs may offer strategic fundraising advantages. In this environment, proactive liquidity planning is essential. GPs who engage LPs early—offering CVs as part of a broader liquidity toolkit—can strengthen relationships and even catalyze future fundraising. Legacy LPs may choose to re-invest proceeds into a GP’s next vintage, and the process itself—often initiated with a simple indicative price—can spark productive conversations around liquidity.

“Private credit continuation vehicle transactions have been embraced at a significantly faster pace than we have historically seen in other secondary asset classes. The growth in capital formation now enables GPs to adopt this technology at scale and offer a new and attractive liquidity option to their LPs.”

— Luca Salvato, Partner and Co-Portfolio Manager, Ares Credit Secondaries

Market Outlook and Sustainability

Continuation vehicles accounted for approximately 60% of the reported $20 billion in FY 2025 credit secondaries transaction volume, highlighting their growing adoption and importance in the market.¹ We have witnessed significant growth in both the frequency and size of CVs, with some private credit managers returning to market after the successful completion of a prior CV process, signaling their use as an ongoing structural tool to help manage the liquidity needs of their underlying investors. We’ve also witnessed the ongoing activation of the European CV market, with a number of leading private credit managers launching scaled CV processes in 2025 and early 2026.

“The successful execution of credit continuation vehicles to date has validated the model and sparked broader market interest. We’re now seeing an increasing number of well-regarded private credit GPs bring sizable, high-quality portfolios to market in both the U.S. and Europe.”

— Dave Schwartz, Partner and Head of Ares Credit Secondaries

Across the market, private credit managers evaluating CV solutions typically seek partners with (i) extensive credit experience and understanding of the underlying companies and assets involved, (ii) proficiency in structuring tailored, often complex, liquidity solutions, (iii) a scaled capital base, and (iv) speed and certainty of execution. These characteristics have become increasingly important as CVs grow in size, complexity, and strategic relevance.

By way of example, in 2025, Ares Credit Secondaries reviewed approximately 30 continuation vehicle transactions, with an average transaction size of $1.4 billion, as outlined in the chart below.

Select CV Transactions Reviewed³

With strong tailwinds—record dry powder, increased awareness and adoption by private credit managers, and dedicated capital formation—the market demonstrates that momentum behind continuation vehicle adoption will likely accelerate in 2026 and beyond.

Ares Credit Secondaries

Ares Credit Secondaries was established in 2023 and is part of the Ares Secondaries Group, a leader and innovator in secondary markets for three decades across private equity, real estate, infrastructure and private credit, managing approximately $42.2 billion in assets as of December 31, 2025.

Ares Credit Secondaries has $4.9 billion of assets under management as of December 31, 2025.