# Continuation Fund Model Model continuation fund structures with roll-over valuations, new LP commitments, and separate GP economics. Calculate blended management fees, carry entitlements by capital tranche, and fund IRR with and without GP co-investment. - Canonical: https://finamodel.com/templates/continuation-fund-model - Excel download: https://finamodel.com/templates/continuation-fund.xlsx - Category: Private Equity - Model type: Fund / Waterfall - Difficulty: Intermediate - Audiences: Fund managers, Investors & analysts, GPs, LP relations, Deal sponsors - Tags: Fund structure, Continuation, LP relations, Carry ## Overview This continuation fund (GP-led secondary) model evaluates a fund structure where a General Partner transfers high-performing assets from a maturing fund into a new vehicle, offering Rolling LPs a choice to stay or exit at a transfer price, while raising new capital from New LPs. The model sizes the fund ($300M), establishes the transfer price ($260M for a five-asset portfolio), and projects asset appreciation and realisation across a 5-year hold period. It calculates gross proceeds from exit multiples applied to asset entry values; deducts management fees, transaction costs, and administrative drag; and feeds the net distributable amount into a waterfall that calculates returns to Rolling LPs and New LPs at different transfer price entry points. The model includes a portfolio schedule showing each asset's entry equity value, appreciation rate (15% base case annual), exit year, exit multiple, and gross/net proceeds after transaction costs. A fund cash flow sheet tracks capital calls (87% in Year 1 for the transfer price, remainder for follow-on reserves and fees), management fees that switch from committed capital in Years 1–2 to invested capital (NAV) in Years 3–5, and distributions. A waterfall section implements a European whole-fund carry structure with 8% hurdle, 100% GP catch-up, and 20% carry. Returns sheets calculate LP IRR and MOIC separately from the transfer price perspective. This model is used by secondary fund managers evaluating GP-led secondary opportunities, institutional LPs assessing the fairness of proposed transfer prices, and continuation fund sponsors modelling LP economics across scenarios. It ensures fund sizing covers the transfer price and preserves carry incentives for the GP, preventing the common error of undercapitalisation that plagued prior builds. ## What's included - Rolled-over asset valuations at continuation close - New LP subscription and capital commitment schedule - Blended management fee calculation - Carry and economics for roll-over versus new capital separately - Fund IRR and MOIC with and without GP co-investment - Carry and economics for roll-over vs. new capital ## Continuation Fund Model: How the GP-Led Secondary Template Works This continuation fund model template illustrates the core mechanics of a GP-led secondary, where a GP transfers portfolio assets into a new vehicle. It shows how to size the fund from the transfer price, model rolling and new LP economics, run a European waterfall, and observe the impact on fund IRR and GP returns. ### Setting Up the Transfer Structure and Fund Economics The model begins with the transfer of specified assets from a predecessor fund into a continuation vehicle. - The total transfer price equals the sum of the individual asset entry enterprise values. - A critical constraint requires the fund size to cover the transfer price plus a follow-on reserve and a fee buffer, avoiding undercapitalisation so the vehicle can meet its obligations. - The template includes a five-asset example with varying exit multiples and exit years, demonstrating how the transfer price, follow-on reserve, and fee buffer combine to determine the overall fund size. Calculation summary: ```text The total transfer price = the sum of the individual asset entry enterprise values ``` ### Asset Appreciation and Realisation Timing Assets are held at fair value and appreciate annually according to a blended rate that reflects EBITDA growth, multiple expansion or compression, and debt paydown. Each asset is then realised in a scheduled exit year, generating gross proceeds equal to its entry enterprise value multiplied by an exit multiple. - Transaction costs, such as advisory and legal fees, are deducted from gross proceeds to arrive at net exit proceeds. The template assumes a 2.0% transaction cost, and no asset exits in the first year. - Follow-on investments can be drawn from a reserve in years two and three, capped by the remaining uncalled commitment. ### From Net Distributable Proceeds to the Waterfall Fund-level costs reduce proceeds before they reach the waterfall. Management fees are calculated as a percentage of committed capital during the initial investment period and as a percentage of prior-year closing net asset value in later years, which helps avoid circularity. - Administration, legal, and audit costs also apply. The resulting net distributable amount feeds a European (whole-fund) waterfall. - This waterfall returns capital, provides an 8% preferred return on outstanding capital, then allocates a GP catch-up and a 20% carried interest on residual profits. The GP participates in the waterfall through its co-investment tranche as well as through carry. ### Evaluating Outcomes for Rolling and New LPs Separate sheets compare the status quo—holding to maturity in the predecessor fund—with the continuation fund rollover, helping rolling LPs assess their decision. The model also calculates distinct IRRs and multiples of invested capital for selling, rolling, and new LP classes. - Returns metrics include net IRR, gross IRR, and MOIC. The GP’s return is split into co-investment MOIC, carry dollars, and carry-to-commit multiple. - Validation checks ensure the waterfall balances, that gross IRR exceeds net IRR, and that the IRR stream includes both outflows and inflows. The download provides a values-only preview, not live formulas. ## Dual economics for roll-over and new capital Model separate carry percentages or clawback mechanics for rolled-over assets versus new capital to reflect the different risk and optionality profiles. ## LP consensus and roll-over incentive modeling Calculate minimum IRR targets for existing LPs to encourage roll-over and estimate pricing that attracts new LPs at continuation close. ## Management fee pooling and allocation Show how continuation fund management fees are charged and allocated between old and new LPs across the vehicle life. ## Dual economics for roll-over and new capital Model separate carry percentages or clawback mechanics for rolled-over assets versus new capital to reflect the different risk and optionality profiles. ## LP consensus and roll-over incentive modeling Calculate minimum IRR targets for existing LPs to encourage roll-over and estimate pricing that attracts new LPs at continuation close. ## Management fee pooling and allocation Show how continuation fund management fees are charged and allocated between old and new LPs across the vehicle life. ## Features - **Dual economics:** Model separate carry percentages or clawback mechanics for rolled-over assets vs. new capital. - **LP consensus modeling:** Calculate minimum IRR targets for existing LPs to encourage roll-over and estimate pricing for new LPs. - **Management fee pooling:** Show how management fees for the continuation fund are charged and allocated between old and new LPs. ## Use cases - **LP continuation decision modeling:** Calculate the expected IRR for existing LPs if they continue vs. exit, and model incentive structures. - **Fundraising scenario planning:** Test different roll-over rates and new LP commitments to model fund size and blended return targets. - **GP economics and co-investment:** Model carry entitlements and co-investment sizing across roll-over and new capital tranches. ## Frequently asked questions ### What is a continuation fund? A continuation fund is a secondary vehicle that allows a GP to roll high-conviction assets from a maturing fund into a new vehicle, giving existing LPs the option to exit or continue. ### What valuation should I use for roll-over assets? Use the most recent independent valuation, subject to partner and auditor sign-off. Build in a 90-day value update cycle before close. ### Can I model partial roll-overs? Yes. Some LPs may choose partial exits. The model supports different roll-over percentages and weights the fund IRR accordingly. ### How do I structure carry fairly for both LP cohorts? A common approach is standard carry for new capital and reduced carry, for example 15 percent instead of 20 percent, for roll-over capital to reflect early exit optionality. ### Who uses continuation fund models? GPs, fund managers, LP relations teams, and deal sponsors use them for fundraising scenario planning, LP consensus modeling, and GP economics analysis. ## Related templates - [Private Equity Fund Model](https://finamodel.com/templates/pe-fund-model) - [Co-Investment Model](https://finamodel.com/templates/co-investment-model) - [Secondary Fund Economics Model](https://finamodel.com/templates/secondaries-model)