Introduction
Two to three minutes of speech leaves room for a few hundred words, and a continuation vehicle (CV) has eight parts an interviewer expects to hear: why the general partner (GP) wants one, the structure, the parties, the price, the limited partners' (LPs') elections, the new money, the new economics and the conflict. Divide the time by the parts and each gets a few sentences, so the question tests compression and order as much as knowledge. The order is not arbitrary. In a CV the price is fixed before most LPs decide whether they are sellers at all, so an answer that starts with the elections, or never says who sets the price, has the causality backwards. The walkthrough is the anchor question for GP-led teams in private capital advisory (PCA), as the PCA interview format notes. What follows turns the guide's GP-led material into an interview answer: the beats, the depth each needs, one example small enough to do aloud, the variants and the follow-ups.
The Order of a Two-to-Three-Minute Answer
A clear CV answer follows the money and the decisions in the order they happen, which is also the order in which each point makes the next one intelligible. The price has to exist before anyone can elect, elections decide how much new money is needed, and the economics and the conflict only make sense once the listener knows the GP is on both sides. The continuation vehicle process lays out the same sequence as a transaction timeline. As a speaking order, with a rough time budget:
Why the GP does it
A strong asset, an aging fund, LPs who want cash, and the alternatives the CV beat. About 15 seconds.
The structure
The old fund sells one or more companies to a new vehicle managed by the same GP. About 15 seconds.
The parties
Selling LPs, rolling LPs, a lead investor and syndicate, the GP, its advisor and the limited partner advisory committee (LPAC). About 15 seconds.
How the price is set
A lead investor's bid from an advisor-run process, quoted against net asset value (NAV) and tested by a fairness opinion. About 20 seconds.
LP elections
Each LP sells for cash at that price or rolls, sometimes on status quo terms. About 20 seconds.
New money
The lead and syndicate fund the sellers; the GP rolls its carry and often adds cash. About 20 seconds.
New economics
A reset fee base and carry measured from the CV price, usually tiered. About 15 seconds.
Conflicts and the buyer's case
LPAC consent, Institutional Limited Partners Association (ILPA) guidance, and why buyers invest. About 20 seconds.
The budget comes to a little over two minutes, leaving room to finish before the interviewer cuts in or to expand whichever beat the interviewer picks up. Two choices separate a clear answer from a list of terms. The first is stating the tension early: once the answer has said that one manager runs both the selling fund and the buying vehicle, every later beat, from the lead investor to the LPAC, reads as a response to it. The second is keeping numbers optional: the verbal version stands on its own, and an example is offered when the interviewer wants one.
What Each Beat Needs, and How Much Detail Is Enough
Interviewers listen for accuracy at the right altitude: enough to show the mechanism, not so much that one beat eats the clock. The table sets a floor and a ceiling for each beat.
| Beat | Must include | Can wait for a follow-up |
|---|---|---|
| Motivation | Aging fund, asset with more to earn, alternatives weighed | Term provisions, extension votes |
| Structure | Old fund sells to a new vehicle run by the same GP | Legal form, feeder entities |
| Price | Lead investor, competitive process, % of NAV, fairness opinion | Locked box mechanics, deferrals |
| Elections | Sell or roll per LP; status quo as protected rolling terms | Tax structuring, top-up rules |
| New money | Lead plus syndicate; GP rolls carry and adds cash | Allocation mechanics |
| Economics | Fee base reset, carry from the CV price | The exact tier schedule |
| Conflicts | GP on both sides; LPAC consent; ILPA recommends | Regulatory history |
| Buyer's case | Company underwritten like a buyout; GP alignment | The buyer's return model |
Motivation, Structure, and the Parties
The opening beat answers why a CV rather than a sale. A GP holds a company it believes has more value to create inside a fund near the end of its term, while some LPs want cash now; a CV offers liquidity to those who want it and more time with the asset. Setting out the alternatives weighed, a third-party sale, an extension, a dividend recap or a NAV loan, shows the CV was a choice, and the comparison of those routes supplies the reasoning.
The structure beat is one precise sentence: the legacy fund sells one or more companies to a newly formed vehicle the same GP manages, and new investors fund the purchase. One company or several is the distinction set out in continuation vehicles explained.
- Legacy Fund (Continuation Vehicle)
The existing fund that sells one or more portfolio companies to a continuation vehicle managed by the same general partner. Its limited partners choose whether to sell their share for cash or roll it into the new vehicle, and the sale proceeds run through the legacy fund's own distribution waterfall.
The parties follow: selling LPs, rolling LPs, new investors (a lead investor and a syndicate), the GP on both sides, the GP's financial advisor and the fund's LPAC. Each later beat is a decision one of them makes.
How the Price Is Set
The price beat is where most answers are thinnest. The GP does not set the price alone: an advisor runs a competitive process among secondary buyers, the winning bidder becomes the lead and sets price and terms, and the price is usually quoted as a percentage of reference-date NAV, the GP's own quarter-end mark. An independent fairness opinion then tests the cash price for the selling fund. The expected depth is this chain of evidence, not a valuation model; the benchmarking work is covered in the advisor's role in a GP-led.
One dated reference point anchors expectations. Houlihan Lokey's 2025 continuation fund study put the median CV price at 97.0% of reference-date NAV, with 49% of sampled deals at or above par, so a price near NAV is normal rather than a sign of generosity.
Elections, New Money, and the New Economics
Each LP then decides alone: cash at the lead's price, or continued exposure inside the CV. Status quo terms are a way of rolling that keeps the old fund's fee base and carry terms, not a third destination, as LP elections and status quo terms explains. ILPA's 2023 continuation fund guidance recommends at least 30 calendar days or 20 business days to decide and treats an LP that does not respond as a seller.
The new money beat follows from the elections. The lead and syndicate fund the cash paid to sellers, rolled interests need none, and the GP is expected to roll its crystallized carry, 100% in almost all cases under the same guidance, and often to add fresh cash. The new economics come last: a management fee on a base reset at the transfer value, and carry that starts from the CV price rather than the old fund's cost, usually tiered and sometimes with a super carry tier, all worked in dollars in CV economics.
- Tiered Carry (Continuation Vehicle)
A carried interest schedule in which the general partner's share of profits rises in steps as the vehicle reaches higher multiples of invested capital or internal rates of return (IRR), instead of one flat rate above a single hurdle. Low tiers keep carry small at modest outcomes; a top tier above 20% is called super carry.
Conflicts, Governance, and the Buyer's Case
The closing beat returns to the conflict. As manager of the seller, the GP gains from a high price, which crystallizes more carry and raises the new fee base; as manager of the buyer, it gains from a low one. The protections are layered: LPAC consent under the limited partnership agreement (LPA), the competitive process and fairness opinion, each LP's free election, and ILPA guidance, which is voluntary best practice and not regulation, distinctions drawn in conflicts of interest, fairness opinions, and the ILPA guidance.
The buyer's case takes a sentence or two: a secondary buyer underwrites a CV like a concentrated buyout, at a price near NAV, with the GP's capital alongside, weighing company quality, entry price, leverage, GP alignment and the exit, the checklist set out in how buyers underwrite a continuation vehicle.
A Worked Single-Asset CV to Do Aloud
The example below is built so every step is mental arithmetic. All figures are illustrative, and fees, costs and interim cash flows are ignored.
A fund with a deal-by-deal waterfall, past its hurdle and catch-up, holds a company it bought for $110 million. The GP's reference-date NAV for the stake is $375 million, and the lead bids 96% of NAV, a transfer price of $360 million. The gain is $250 million, so carry at 20% is $50 million and the LPs' share is $310 million. LPs holding 90% of that value sell, 10% roll, and the GP rolls all of its crystallized carry.
| Holder in the legacy fund | Share of the price | Cash at closing | Stays in the CV |
|---|---|---|---|
| Selling LPs (90% of LP value) | $279m | $279m | $0 |
| Rolling LPs (10% of LP value) | $31m | $0 | $31m |
| GP carry, crystallized and rolled | $50m | $0 | $50m |
| Total | $360m | $279m | $81m |
The sellers' $279 million is exactly the cash new investors must provide, because the rollers' $31 million and the GP's $50 million stay in as equity. At closing the new investors own 77.5% of the vehicle, the GP about 14% and the rollers about 9%.
- Roll Rate (Continuation Vehicle)
The share of a legacy fund's LP interests that elects to roll into a continuation vehicle instead of selling, measured by value or by number of investors. It sets how much new capital the vehicle must raise to pay sellers, and published figures differ depending on whether they count dollars or decisions.
Pressure-Testing the Numbers
Interviewers usually change one input at a time, and each change tests a different beat:
- More rollers. Each 10 points of LP value that rolls removes $31 million from the new money; at a 30% roll rate new investors fund $217 million, and if nobody rolls, $310 million.
- Status quo terms. No carry crystallizes on the rollers' share, so they roll a gross $36 million with $5 million of carry still owed under the old terms; the GP crystallizes $45 million on the sellers' share, and sellers still receive $279 million.
- A whole-of-fund waterfall not yet in carry, common in European funds. Nothing crystallizes, sellers receive 90% of $360 million, or $324 million, and GP alignment must come from fresh cash.
- The new fee base. At an illustrative 1% of the transfer value, the CV charges $3.6 million a year, and every point added to the price raises it.
The buyer's side takes one more step. If the plan doubles the equity to $720 million in four years, that is a 2.0x multiple on invested capital (MOIC), and since two to the power of one quarter is about 1.19, roughly a 19% gross IRR. Evercore's July 2026 secondary market review put average gross target multiples for single-asset CVs at about 2.3x over a four-year horizon, which on this plan supports about $313 million, roughly 83.5% of NAV. A buyer bidding 96% believes in more than the plan shown or accepts a lower return for a company it rates highly, and saying which shows where the price comes from. Why multiple and IRR diverge as holds lengthen is covered in IRR vs MOIC vs cash-on-cash.
How the Answer Changes for Other Structures
The eight beats stay; the emphasis moves, and an interviewer asking about a variant is testing which beat carries the risk. One dated figure frames the mix: in Evercore's 2025 secondary market report, single-asset CVs accounted for about $52 billion and multi-asset CVs about $42 billion of $106 billion in GP-led volume, with about $12 billion in other GP-led deals, a split followed into the latest half-year in the GP-led market and the single-asset CV shift.
Multi-Asset CVs
In a multi-asset CV the price beat changes most. Buyers price company by company and concentrate diligence on the largest positions, so the answer should mention perimeter selection and the suspicion that one strong company is carrying weaker ones. When companies come from more than one of the GP's funds, one negotiated price must also be split between groups of LPs.
Credit Continuation Vehicles
A credit CV moves a loan portfolio. The motivation beat shifts toward extending duration and reworking fund leverage, the price beat centers on loan performance and cash yield, and the reference date matters more because a cash-generating portfolio drifts from its mark quickly. Houlihan Lokey found credit CV pricing frequently at or around par in recent deals. Other strategies are compared in GP-leds beyond buyout.
Tender Offers and Strip Sales as Alternatives
Neither is a CV, and saying so is part of the answer. In a GP-led tender offer, a buyer offers one price for interests in the existing fund and each LP chooses whether to sell; in a strip sale, the fund sells a slice of every position and no LP decides anything. Both leave the existing fund in place rather than moving whole positions into a vehicle with reset terms, as tender offers and strip sales explains.
Follow-Up Questions and What Each One Tests
Follow-ups arrive at the beats the interviewer thought were thin, so each tests depth on one beat. Good responses are short and reuse the example's numbers where they help:
- Why not just sell the company? Tests motivation. A sale ends everyone's exposure at a control price while a CV lets each LP choose; a credible response concedes that a sale is the cleaner price test, which is why prior interest from trade or sponsor buyers and a market check matter.
- Who protects the selling LPs? Tests the price beat: competing bidders, a lead paying with its own money, a fairness opinion, LPAC review, and the fact that selling is optional.
- Why would a buyer pay close to NAV? Tests the buyer's case: usually the GP's highest-conviction company, underwritten on the buyer's own plan, with the GP's rolled carry entering at the same price.
- What if too many LPs roll, or all of them sell? Tests new money: more rolling shrinks the raise and can leave the lead short of its minimum allocation, which is why the syndicate is sized only once elections are counted.
- How is the GP aligned? Tests economics: rolled carry, fresh cash, new carry paid only on gains above the CV price, and whether the commitment is the GP's own money or financed.
"What does the LPAC actually approve?" crosses beats: the committee waives the conflict so the GP may proceed, while each LP accepts or refuses the price through its own election. Rehearsing alongside the LP portfolio sale walkthrough sharpens both answers, since the contrast between the two is itself a common probe.
Mistakes That Undo an Otherwise Good Answer
Most weak CV answers fail on framing rather than facts. Six errors recur:
- Calling the CV a sale to a third party. New investors fund it, but the buyer is managed by the same GP, and that related-party nature is the point.
- Confusing LP-led and GP-led. An LP-led sale moves an investor's fund interest; a CV moves the fund's assets at the manager's initiative.
- Forgetting the GP is on both sides. Without it, the lead, the fairness opinion and the LPAC have no reason to exist.
- Assuming a premium or discount without the process. The price is whatever a lead bids through a tested process.
- Treating ILPA guidance as regulation. ILPA recommends; its guidance binds a GP only through fund documents or its own commitments.
- Mixing survey figures. Each survey defines and samples the market its own way, and a GP-led total is not a CV-only number.
The first confusion is resolved in what LP-led secondaries are. On regulation, the Securities and Exchange Commission (SEC) rule that would have required a fairness or valuation opinion for adviser-led secondaries was vacated by the Fifth Circuit in June 2024, as the SEC rules and their vacatur recounts. And ILPA's draft continuation vehicle guidance, published in June 2026, closed for comment on August 5, 2026, with ILPA planning to finalize it later in the year.
An answer built in this order also degrades gracefully, which matters because interviewers interrupt. Cut off after thirty seconds, it has already said why the GP acts and that one manager's old fund is selling to its new one. Cut off after ninety, it has covered who sets the price and how each LP chooses, the two points that separate a CV from any other sale. Every later beat adds depth to a structure the interviewer already holds, so wherever the conversation turns, what has been said is correct and complete for its length.
