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By Gavin Anderson and Benjamin Amos, from U.S. law firm Debevoise and Plimpton
Continuation vehicles (CVs) have been on a hot streak. Last year, more than $70 billion of GP-led secondaries closed, setting a new record. The market is evolving rapidly, with plentiful pools of secondary capital to soak up investor demand, including new sources such as '40 Act funds. In this article, we look at some of the current trends and where they might lead.
Single- vs. Multi-Asset CVs
The last few years have seen a fairly steady mix of both single- and multi-asset CVs. A single-asset CV may be the ideal showcase for a sponsor's "crown jewel," allowing the asset to show its full potential with a bespoke vehicle and potentially a deeper diligence process for investors. Some fund sponsors have even raised funds dedicated to investing in single-asset CVs. Yet, multi-asset CVs also have their advantages. From the sponsor side, they can help to achieve critical mass and/or synergies and can be an effective way to clean up end-of-life funds. For investors, they provide natural diversification, which may appeal to a different investor base, and they result in netted economics, so that carry is only payable if the portfolio as a whole performs well. We expect both types to remain prominent.
Sector Specialization
Credit
Although we have worked on some large and notable credit CVs, they still represent a relatively small slice of the market. Following the...................... To view our full article Click here
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