Definition
Secondary Fund (Continuation)
A secondaries or continuation fund buys existing stakes in portfolio companies or fund interests, providing liquidity to earlier investors.
In private markets, secondary funds purchase LP interests in existing funds, or buy direct stakes in portfolio companies, giving the original holders an exit before a traditional sale or IPO. A continuation vehicle is a structure where a GP moves a strong asset into a new fund, letting existing LPs cash out while new investors continue holding it.
These structures have grown as IPO and M&A exits became harder, offering interim liquidity. They are part of the broader secondary sale ecosystem in PE and VC.
Related terms
- Exit (Startup/PE)An exit is the event through which investors realise the value of their stake — typically an IPO, acquisition or secondary sale.
- Secondary SaleA secondary sale is the sale of existing startup shares from one shareholder to another, rather than the company issuing new shares.
- Limited Partner (LP)A limited partner is an investor who commits capital to a fund but does not run it, with liability limited to the amount invested.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.