A continuation fund is a new vehicle a general partner sets up to acquire one or more portfolio companies out of an ageing fund it also manages, giving that fund's existing limited partners the choice to cash out or roll their interest forward while new investors supply the fresh capital.
The transaction is unusual because the same GP sits on both sides of it — selling as manager of the old fund, buying as manager of the new one — which is precisely the conflict that makes an independent, arm's-length valuation the practical safeguard the market has settled on. In Canada that valuation is typically a fairness opinion prepared to the CBV Institute's Practice Standard 510/520/530, which defines a fairness opinion as a conclusion on "the fairness of a proposed transaction to security holders … from a financial point of view." Those standards were replaced for independent valuation engagements beginning on or after January 1, 2026, so a fairness opinion commissioned for a Canadian continuation-fund deal should be checked against the current Practice Standards rather than an older tier name.
Raising the new vehicle is also a fresh securities-law event: investors rolling forward, and any new money coming in, both need to fit inside a prospectus exemption under National Instrument 45-106, just as they did when the original fund was raised — a continuation fund does not inherit the old fund's exemption, it has to clear its own.
For the limited partners on each side, the deal reads differently. An LP in the old fund cashing out gets liquidity on an asset the GP had no obligation to sell on any particular timeline, priced by the independent opinion rather than negotiated against a single outside bidder. An LP subscribing into the new vehicle is underwriting one known, already-diligenced asset rather than the blind pool of future deals a first-time fund commitment usually buys — a materially different risk than the limited partnership agreement of a conventional fund asks an LP to accept at closing.
Meridian Growth Fund I, LP is eleven years old and still holds one strong asset it is not ready to sell. The GP forms Meridian Continuation Fund I, LP, obtains an independent fairness opinion valuing the asset at $80,000,000, and gives Fund I's limited partners the choice to receive $80,000,000 of cash (their pro-rata share of that valuation) or roll their interest into the continuation vehicle at the same value; new limited partners subscribe $50,000,000 of fresh capital into the continuation fund under the same accredited-investor exemption the original fund used.
See also: General partner · Limited partnership agreement · Distribution waterfall.
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