Continuation Funds Drive Record H1 for Secondary Market
· news
Continuation Funds Drive Record H1 for Secondary Market
The secondary market has reached new heights in the first half of 2026, with a staggering $120 billion in transactions. This represents a 20% increase over the previous record set in 2025 and is largely driven by single-asset continuation funds.
These funds have become increasingly popular among sponsors seeking to extend ownership of their highest-conviction assets. They account for more than half of all GP-led deal volume, with $34 billion in deal value in H1 2026 alone. This growth can be attributed to investors’ desire to participate in high-growth companies without excessive risk and sponsors’ need to generate distributions while maintaining control over their prized assets.
The proliferation of single-asset continuation vehicles has been fueled by firms like Pantheon, which have dedicated funds specifically for backing these CVs. However, not all sectors are faring equally well. The data reveals that software CVs as a percentage of GP-led volume have fallen by 8 percentage points, indicating investors’ growing risk aversion in this space.
Concerns about AI disruption, declining valuation of public comparables, and variable operational performance are contributing to this trend. This serves as a reminder that the secondary market is not immune to broader macroeconomic trends shaping the industry. As such, buyers must remain vigilant and adapt their strategies to navigate these shifting sands.
The elevated secondary market volume has led to a decline in dry powder, with available capital dwindling at an alarming rate. According to PitchBook’s 2025 Global Private Market Fundraising Report, dry powder declined by 10% from the start of the year to the end of H1. This reduction in dry powder has led to a decrease in the capital overhang multiple, now close to 1.0x, indicating that buyers are struggling to keep pace with demand.
This trend raises important questions about the sustainability of current market conditions. If dry powder continues to dwindle, will we see a correction in the secondary market? Or will investors and sponsors find new ways to adapt to these changing circumstances?
As we look ahead to the second half of 2026, it’s essential to consider the potential risks lurking beneath the surface. While record deal volumes may dominate headlines, the underlying data reveals a complex web of factors driving this growth – and potential pitfalls waiting to be addressed.
Reader Views
- CMColumnist M. Reid · opinion columnist
The secondary market's record-breaking first half may mask a more nuanced reality: sponsors are using single-asset continuation funds as a means to artificially prop up valuations of their prized assets, rather than truly facilitating efficient capital reallocation. This raises questions about the sustainability of such arrangements and whether they're merely delaying the inevitable – namely, the need for investors to reprice these assets in line with market realities.
- RJReporter J. Avery · staff reporter
The record-breaking H1 for secondary market deals is undeniably driven by single-asset continuation funds, but what's striking is the divergent fortunes of different sectors. While software CVs have seen a notable decline in investor interest, due to concerns over AI disruption and valuation uncertainty, other asset classes are thriving. It's worth considering whether this risk aversion towards software will be short-lived or indicative of a broader shift in investment preferences. Will sponsors pivot to safer assets, or will innovative deal structures revitalize the market?
- EKEditor K. Wells · editor
The secondary market's reliance on single-asset continuation funds is both a blessing and a curse. While these funds provide sponsors with a way to extract value from their highest-conviction assets, they also create a precarious situation where dry powder levels are dwindling at an alarming rate. The article notes the 10% decline in available capital, but doesn't explore the implications for investors who were expecting more liquidity in the market. As dry powder vanishes, buyers must navigate increasingly competitive bid processes and rising prices – a perfect storm that could ultimately lead to market fatigue.