Continuation funds boom as private equity faces a frozen exit market

Buyout firms are leaning more heavily than ever on continuation funds as traditional exits via IPOs or sales to outside buyers dry up, the Financial Times reports. Continuation funds accounted for USD 41 bn of exits in 1H 2025 — equal to 19% of all private equity sales, and 60% more than the same period last year, the FT reports, citing a recent report from investment bank Jefferies.

That’s a record share as sponsors struggle to return capital to investors amid a prolonged slowdown in public listings and M&A agreements. The secondary market — where buyout firms and institutional investors can trade stakes — has also seen a boom in activity, with over USD 100 bn of holdings changing hands.

How it works: The continuation mechanism essentially allows the firm to sell portfolio companies to themselves by transferring it to another of its internal funds. Investors can either cashout or roll over into the new vehicle. In theory, that gives buyers and sellers more time to realize value. In practice, it’s also a way to recycle capital and keep fee streams alive.

PE groups are holding upwards of USD 3 tn in unsold assets and are approaching a fourth year of subpar distributions to investors. “The exit environments are challenging and the IPO market is dormant,” Jefferies global co-head of secondaries Todd Miller told the Financial Times.

Despite the boom, continuation funds are not the preferred route for PE investors, with just one-sixth preferring continuation funds over traditional exits and nearly two-thirds saying they’d rather see sponsors sell via IPOs or M&A, according to a Bain & Co survey.

Still, it’s here to stay: Jefferies’ global co-head of secondary advisory Scott Beck expects “most sponsors will plan to do one or two” continuation funds out of every new fund, calling them a “bona fide exit route.”

MARKETS THIS MORNING-

Asian markets are mostly in the red this morning, with Chinese stocks opening lower and Japan’s Nikkei down 0.6%. The only outlier is South Korea’s Kospi, which is up 0.2%. Wall Street futures, on the other hand, are pointing to a strong open after the S&P 500

and Nasdaq notched another record closing high yesterday.

THE CLOSING BELL-

The DFM rose 0.4% yesterday on turnover of AED 762.3 mn. The index is up 18.4% YTD.

In the green: Dubai Refreshment Company (+6.3%), Sukoon Takaful (+5.8%) and BHM Capital Financial Services (+4.8%).

In the red: National General Ins. Company (-6.8%), International Financial Advisors (-5.1%) and Al Salam Sudan (-5.0%).

Over on the ADX, the index remained flat on turnover of AED 1.5 bn. Meanwhile, Nasdaq Dubai was up 0.2%.

CORPORATE ACTIONS-

Amlak settles up debt ahead of schedule: Real estate financier Amlak Finance has fully settled its remaining AED 898 mn in financial obligations, completing all payments 15 months ahead of the October 2026 contractual deadline, according to a press release (pdf). The firm has settled AED 10.2 bn with 29 financiers since 2014. The company utilized proceeds from land asset sales (here and here) after deciding to exit its real estate finance portfolio to facilitate the early settlement.

E7 Group's board of directors has approved a one-time special dividend of AED 800 mn as part of its capital restructuring strategy, according to a disclosure (pdf). It also committed to minimum annual dividends of 10 fils per share through 2027 and announced a voluntary warrant buyback at AED 2.40 apiece.