ILPA Finalizes Updated Continuation Vehicle Guidance – Key Takeaways for Sponsors

ILPA has issued final guidance on continuation vehicle (CV) transactions, updating the framework it first published in 2023 and following on from draft guidance circulated in July. The new guidance - Continuation Vehicles: Advancing Alignment Through Best Practices - was shaped by an extensive public comment period and industry engagement, and lands at a moment when CVs have become a mainstream exit route in GP-led secondaries, offering sponsors liquidity and new capital while giving LPs optionality.

The core architecture is familiar, but the guidance is more prescriptive than its predecessor on the issues institutional investors have flagged as most contentious: LPAC involvement, disclosure, pricing integrity, and the treatment of LPs who roll into the CV.

"Remain in place" survives, but only as an option. The most notable shift from the July draft is a more realistic stance on the "remain in place" concept - letting LPs who want to keep their exposure stay in the selling fund on existing terms, while those who want out are cashed out. Practitioners criticized the idea as impractical and, in some cases, unworkable, warning it could add cost, execution risk, and complexity: weaker pricing, a second exit process for the retained stake, and new conflicts from running two LP pools and two fund vehicles side by side. ILPA's final guidance acknowledges these concerns and no longer treats the option as a default - it is appropriate only where it supports the CV thesis and its benefits outweigh the downsides. A "roll" election that keeps rolling LPs no worse off economically than staying in the existing fund is presented as the practical alternative.

Side-by-side modelling. The ILPA guidance asks that election materials compare the CV's standard fee and carry terms with the selling fund's, and model the impact of any differences over a comparable hold period. This may be difficult to implement in practice. The challenge is structural: CV terms are negotiated with a lead investor in a competitive process and are designed around the expected return profile of a specific asset or assets, while selling fund fee and carry mechanics operate in the context of a portfolio of assets acquired by a blind pool fund. A hypothetical in which the transferring asset(s) remain in the selling fund until eventual disposal (potentially beyond its term) may therefore not be meaningful, and the output would depend on contestable assumptions. That said, the guidance provides that the overall economic burden of fees and carry for rolling LPs should generally be no worse than if they had remained in the asset in the selling fund, applying "good-faith, reasonable assumptions", with comparative information scaled to the size and complexity of the transaction. It also contemplates CV participation either on the same terms as new CV investors or on a "status quo" basis that closely replicates existing fund economics. A pragmatic approach is therefore likely to be a clear side-by-side key terms comparison, supported by illustrative modelling proportionate to the deal, rather than a full scenario analysis. This is an area where ILPA's guidance may be ahead of current sponsor practice in recent CV transactions.

Key themes for sponsors to watch:

• Deliberate choice, full exit. A CV should be a considered structuring decision - not a default - with the GP carrying the burden of showing it is the best outcome for existing LPs versus the alternatives. CVs should also be full exits, not strip sales.
  
  
• LPAC oversight, not negotiation. The LPAC should scrutinize the GP's conflict management closely, though it remains an oversight body, not a negotiating party - the GP stays responsible for the process. Expect recommendations for early engagement, at least 10 business days' notice before the conflicts meeting, in-camera sessions, a vote on each individual conflict (no blanket waivers), and LPAC access to independent advice at fund expense where proportionate, though that last option remains rare in practice.
  
  
• Pricing and process discipline. Pricing should be backed by a competitive auction and/or independent price validation, often via a fairness opinion valuing 100% of the asset - though a sufficiently competitive process may substitute for one. Any discount to prior valuations should come with a clear explanation of the rationale and trade-offs, alongside robust disclosure of adviser conflicts and incentives.
  
  
• A longer, better-informed election process. Elections should run at least 20 clear business days from the final election pack, with more time for complex or multi-asset deals. LPs should have data room access throughout, and non-responders should be treated as sellers - never forced to roll.
  
  
• Rolling LP economics protected. As a general principle, rolling LPs should be no worse off than if they'd simply stayed invested under the existing fund's terms - covering carry crystallization, GP economics disclosure (with-CV versus without-CV), reinvestment of crystallized carry and sponsor proceeds, and a bar on tying roll eligibility to commitments in other GP funds. LPs can't be forced to sell purely for lack of fresh capital, though follow-on funding can be made a roll condition where central to the CV thesis, provided any dilution is disclosed.
  
  
• Symmetry of information. ILPA wants consistent, disciplined disclosure across existing LPs, co-investors (who should get no less information than other LPs), and new CV investors, including on costs and cost allocation.

How different is this from current practice? The guidance is explicitly non-binding and principles-based, and ILPA recognizes that CV transactions are highly fact- and circumstance-specific, so it does not purport to override deal-by-deal judgment. Based on the summary prepared internally, the final guidance is largely consistent with ILPA's 2023 guidance in substance, with the most significant development being the softened, optional framing of "remain in place" compared to the July 2026 draft.

The takeaway. ILPA recommendations carry real weight in the market, and LPs and LPAC members are likely to measure CV disclosure and conflicts-waiver processes against this framework. Sponsors preparing CV transactions should expect these expectations to inform negotiations well before the ink on any formal rulebook changes.