Cloud 9fin
For the continuation fun[d] of it
Feb 21, 2025
The conversation dives into the rise of private credit continuation vehicles, emphasizing their appeal in today's M&A landscape. It touches on BlackRock's substantial launch and the expectations for growth in 2025. However, challenges abound, including liquidity issues in a high interest rate environment and difficulties attracting limited partners. The discussion also tackles the dynamics of selling performing loans at discounts and the critical role of relationships in navigating asset transitions.
07:24
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Quick takeaways
- Continuation vehicles in private credit allow managers to extend fund life and address investor liquidity concerns, despite complexities associated with distressed assets.
- Successful implementation hinges on careful loan valuation and maintaining strong relationships with limited partners to mitigate conflicts of interest and ensure approval.
Deep dives
The Role of Continuation Funds in Private Credit
Continuation funds provide private credit managers with a mechanism to extend the life of older funds that are nearing maturity. This approach allows managers to avoid the complications that arise when a fund fails to realize expected returns and starts to run past its term. The continuation vehicle offers investors, particularly institutional ones, the chance to either roll over their investments or cash out, addressing the liquidity concerns in a challenging market environment. This strategy mirrors practices in private equity but is complicated by the nature of private credit, where the assets involved are generally distressed loans rather than high-value 'trophy' assets.
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