Net MOIC by transaction type
Source: Morgan Stanley Private Capital Advisory, The Case for Continuation Funds: An Updated Review of Initial Performance, March 2025. First quartile boundary (“Q1”), median, and 3rd quartile boundary (“Q3”) return benchmarks are calculated using Preqin performance data. All data represents relevant funds with vintages between 2018 and 2024. Past performance is not a guarantee of future results.
Key takeaway
With investors increasingly looking for ways to optimize portfolio construction across an active and growing secondary market, single-asset continuation funds are offering alpha potential that can complement a diversified secondary allocation.
The composition of diversified secondaries portfolios can vary widely across managers. Diversified secondary funds can offer broad exposure across vintages, sectors, geographies, and managers that can help mitigate idiosyncratic risk, but they often underweight single-asset continuation vehicles (SACVs). SACVs often represent a GP’s top performing assets, providing investors access and visibility into known value creation strategies and high-performing business models—which can help mitigate downside risks.
As illustrated, SACVs have shown the potential to deliver higher top-quartile returns on a MOIC basis relative to buyouts, with median and third-quartile SACV performance also comparable or better. For investors, adding SACVs to a diversified secondary allocation can inject concentrated alpha potential while building a more “market neutral” weighting (~20%) that closely reflects current secondary market activity. For more insights on secondaries and SACVs and their role in private markets see our recently published “Enhancing Diversified Secondaries with a Complementary Allocation to GP-led Single-Asset Funds.”
The HarbourVest advantage
Disclosure
HarbourVest Partners, LLC is a registered investment adviser under the Investment Advisers Act of 1940. This material is solely for informational purposes and should not be viewed as a current or past recommendation or an offer to sell or the solicitation to buy securities or adopt any investment strategy. The opinions expressed herein represent the current, good faith views of the author(s) at the time of publication, are not definitive investment advice, and should not be relied upon as such. This material has been developed internally and/or obtained from sources believed to be reliable; however, HarbourVest does not guarantee the accuracy, adequacy, or completeness of such information. There is no assurance that any events or projections will occur, and outcomes may be significantly different than the opinions shown here. This information, including any projections concerning financial market performance, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. The information contained herein must be kept strictly confidential and may not be reproduced or redistributed in any format without the express written approval of HarbourVest.
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Private Investments Continuation Investing Risks. The business of identifying and structuring continuation private investments is competitive and involves a high degree of uncertainty. In addition, the returns achieved by an investment will depend in large part on the efforts and performance results obtained by the sponsors of the continuation vehicle. Moreover, the continuation vehicle will not have an active role in the day-to-day management of the investments or in the tax structuring of investments made by the sponsors or the ability to approve the specific investment or management decisions made by the sponsors. As a result, the returns of the continuation vehicle will primarily depend on the performance of unrelated investment managers and other management personnel. A continuation vehicle may invest in leveraged buyouts of companies; leveraged buyouts by their nature require companies to undertake a high ratio of leverage relative to available income. It is important to note that use of leverage will decrease the returns of an investment if it fails to earn as much on investments purchased with borrowed funds as it pays for the use of those funds.
Secondary Investing Risk. Secondary market transactions may impose higher costs than other investments and may require a fund to assume contingent liabilities associated with events occurring prior to the Fund’s investment. The overall performance of an Underlying Portfolio Fund acquired through a secondary transaction will depend in large part on the purchase price paid. In addition, a fund will generally not have any ability to negotiate terms with respect to interests in Underlying Portfolio Funds invested in through secondary market transactions.
