This article was posted on the ChosunBiz MoneyMove (MM) site at 5:16 p.m. on Sep. 25, 2025.
The "continuation fund," which first appeared domestically in 2022, has recently attracted attention again. Because market conditions are poor and buyers are scarce, rather than selling at a loss, firms are creating new funds to buy time and wait for a better sale opportunity.
A continuation fund keeps the existing private equity fund's GP (manager) but transfers only the assets held by that fund to a new fund. In this process, existing investors (LPs) can either redeem their capital in cash or move their equity to the new fund. Private equity managers see this as a compromise, but some raise concerns. They warn it could be a way to reshuffle hard-to-sell assets under a different fund name.
According to the investment banking (IB) industry, global infrastructure-focused private equity firm Brookfield Asset Management halted its long-stalled sale of the International Finance Center (IFC) in Yeouido, Seoul, and decided to create a new fund to transfer the asset. It has recently been recruiting new LPs, such as mutual aid associations and pension funds. Brookfield bought the IFC from U.S. AIG in 2016 for about 2.55 trillion won and started pushing for a sale in 2021, but it insisted on a price in the 4 trillion won range and could not close the gap with potential buyers who were offering lower amounts.
Beyond Brookfield, many private equity firms have recently chosen to form continuation funds. European CVC Capital had been seeking to sell the travel and lodging platform Yeo-gi-o-dae since early last year but ultimately decided to form a new continuation fund together with global investment firm Harbervest Partners. Domestic private equity firms are doing the same. JC Partners plans to form a continuation fund by recruiting new LPs to retain control of insurance agency Goodrich, and IMM Investment plans to recruit new LPs to keep control of wired telecom company Dreamline.
The industry view of continuation funds is not entirely positive. Critics say it can be a way of passing around distressed assets that are hard to sell, likening it to passing a hot potato. For that reason, existing LPs are likely to be reluctant to reinvest, and new LPs require assurance they can achieve higher value, which leads to higher fund management fee payment standards.
An industry official said, "Even abroad, where continuation funds have become common, some see them as cyclical transactions that only change the fund's name because the assets can't be sold," adding, "This is because the GP serves as both the seller in the existing fund and the buyer in the new fund." He went on to say, "Especially in Korea, the LP pool is limited, so continuation funds can be awkward for LPs," and warned, "Even if corporate value appears to have fallen, in some cases it is instead being presented as rising."
Of course, some private equity firms explain they use continuation funds for long-term holdings because larger returns are expected later. Existing fund LPs can achieve a satisfactory exit based on past performance, and new investors can gain the opportunity to invest in corporations whose performance is expected to improve going forward.
Another industry official said, "PEFs have long faced criticism for focusing only on short-term investment performance, and continuation funds can be viewed as a tool to concentrate on mid- to long-term growth," but added, "It is important to secure LP trust that an asset's value will truly rise, because truly top-quality assets would have drawn fierce acquisition competition."