Key Takeaways
- • Private equity firms are increasingly deploying "CV-squared" structures—rolling assets from first-generation continuation vehicles into second-generation continuation vehicles—as a strategy to extend holding periods amid prolonged dealmaking weakness and market uncertainty.
- • The secondary market recorded $160 billion in global transaction volume in 2024, with H1 2025 showing $103 billion in volume, of which $47 billion comprised GP-led deals; Lazard projects the market will reach $172 billion in 2025.
- • CV-squared transactions are generating heightened scrutiny from limited partners over returns, fees, exit routes, and asset quality, with concerns emerging around "quasi-zombie" funds and extended hold periods lacking clear liquidity pathways.
- • GP-led secondary deals remain stable at approximately 50% of total secondary market volume, indicating structural consistency in the market even as sponsors adopt more layered continuation structures to manage portfolio maturity.
Summary
The secondary private equity market is witnessing an acceleration of "CV-squared" transactions, in which general partners roll assets from first-generation continuation vehicles (CVs) into second-generation CVs rather than executing traditional exits. This strategy has become increasingly prevalent as dealmaking activity remains subdued and sponsors seek alternatives to selling assets at depressed valuations or to competing bidders. The practice marks an evolution from the pandemic-era wave of CV deployment that began in 2020, effectively extending the hold periods on portfolio companies by another generation of continuation vehicles.
Secondary market volume reached $160 billion globally in 2024, a new annual record, with H1 2025 recording $103 billion in transactions. Of that H1 2025 volume, $47 billion stemmed from GP-led transactions, underscoring the growing prevalence of sponsor-initiated secondary activity. Lazard expects full-year 2025 secondary transaction volume to reach $172 billion. GP-led deals have maintained a stable share of approximately 50% of total secondary market volume over multiple years, indicating the structural importance of sponsor-driven secondaries to the broader market.
However, the proliferation of CV-squared deals has prompted increasing due diligence scrutiny from limited partners. Investors are raising concerns about the quality of assets being recycled through successive continuation structures, the accumulation of management fees across multiple vehicles, and the absence of clear exit pathways or liquidity events. Some assets rolling into second-generation CVs are being characterized as "quasi-zombie" positions lacking near-term exit catalysts. LPs are demanding greater transparency regarding valuation methodology, return expectations, and the rationale for extending hold periods rather than pursuing traditional secondary sales or primary exits. This tension reflects a fundamental question about whether CV-squared structures represent legitimate portfolio optimization or a mechanism to defer difficult valuation and exit decisions.
Secondary market volume reached $160 billion globally in 2024, a new annual record, with H1 2025 recording $103 billion in transactions. Of that H1 2025 volume, $47 billion stemmed from GP-led transactions, underscoring the growing prevalence of sponsor-initiated secondary activity. Lazard expects full-year 2025 secondary transaction volume to reach $172 billion. GP-led deals have maintained a stable share of approximately 50% of total secondary market volume over multiple years, indicating the structural importance of sponsor-driven secondaries to the broader market.
However, the proliferation of CV-squared deals has prompted increasing due diligence scrutiny from limited partners. Investors are raising concerns about the quality of assets being recycled through successive continuation structures, the accumulation of management fees across multiple vehicles, and the absence of clear exit pathways or liquidity events. Some assets rolling into second-generation CVs are being characterized as "quasi-zombie" positions lacking near-term exit catalysts. LPs are demanding greater transparency regarding valuation methodology, return expectations, and the rationale for extending hold periods rather than pursuing traditional secondary sales or primary exits. This tension reflects a fundamental question about whether CV-squared structures represent legitimate portfolio optimization or a mechanism to defer difficult valuation and exit decisions.
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