Following the 2008 financial crisis, underperforming PE general partners (GP) found themselves in a pickle. Their portfolio was underperforming and their limited partners (LP) were nervous about their return on investment. This made it difficult for GPs to raise money.

Some came up with an idea: carve out their portfolio’s best performers into a new fund, a “continuation” fund, while selling the rest of the portfolio. Those sales returned some money to LPs. They could then either buy into the new continuation fund or call it a day. The GP, armed with a sexier fund and a sexier pitch, could also hunt for new LPs. READ MORE