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.
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Private Credit Lags in Continuation Funds
- Continuation vehicles are popular in private equity but haven't taken off in private credit.
- This is despite BlackRock's large continuation fund in 2024 and expectations of more in 2025.
Purpose of Continuation Vehicles
- Private credit funds use continuation vehicles to close older funds and return capital to investors.
- It helps manage funds nearing maturity or facing realization challenges.
Liquidity Challenges Drive Continuation Funds
- The rise of continuation funds coincides with a liquidity problem in private credit.
- Fund managers are under pressure to repay investors due to high interest rates and a slow M&A market.