Investors chasing high-quality continuation vehicle deals are running into a supply problem, says Zach Schneider, partner at Twin Bridge Capital Partners.
Schneider joins Joncarlo Mark, a partner at Upwelling Capital, and Liquid Courage host David Snow to explain why a “flight to quality” is creating oversubscribed processes for trophy assets, even as many lower-quality CV transactions struggle to get done. He also explores what Twin Bridge looks for in a continuation vehicle, how competition is changing pricing and economics, and what could ultimately happen to the underperforming private equity assets that fail to find buyers.
Among the key takeaways of this conversation:
• Demand for trophy-asset CVs exceeds supply. When a high-quality sponsor brings a high-quality asset to market, Schneider says processes can become meaningfully oversubscribed, shifting negotiating leverage toward sponsors. Meanwhile, many lower-quality transactions never clear the market.
• Competition for the best CV assets could intensify. More than 90% of existing LPs in CV transactions are currently choosing liquidity rather than rolling their stakes, creating room for secondary investors. But if that sell rate declines as traditional M&A recovers, capacity for new investors could shrink even as demand for trophy assets continues to grow.
• Trophy assets are commanding stronger pricing and economics. Some are trading in the high 90s as a percentage of NAV or even above par, while sponsors of particularly attractive CVs are increasingly securing premium carry tiers of 25% or 30% when certain return thresholds are exceeded.
• The market is separating winners from underperformers. In some multi-asset CVs, sponsors have tried pairing one strong company with weaker assets. Schneider says investors are increasingly rejecting those structures, sometimes forcing sponsors to carve out the trophy asset into a single-asset deal and leave the underperformers behind.
Access the full transcript and a searchable library of content at the Liquid Courage Substack.
#liquidcourage #continuationvehicles #secondaries #privateequity #GPled #privatecapital
