How I Invest with David Weisburd

Episode E325: Inside the $100B Continuation Vehicle Boom
Date: March 16, 2026
Guest: Michael (TPG)

Episode Overview

This episode delves deep into the rapidly growing market for single asset continuation vehicles (CVs) within private equity — a market now exceeding $100 billion and surging at a breakneck pace. David Weisburd interviews Michael from TPG, who offers insider insight into how CVs work, the dual skill sets required, structuring conflicts, incentives, economics, risks, and the massive impact this innovation is having on private equity, venture capital, and liquidity for LPs and GPs alike.

Key Discussion Points & Insights

1. The Evolution and Rationale of Continuation Vehicles

• Traditional Private Equity Pressure & Opportunity
  • GP faces pressure to sell stellar assets (after 4-5x return) due to fund lifecycle demands, investor need for DPI, or sponsor reset. Previously, these assets were sold to competitors, who’d then make further gains.
  • “Every sponsor at some point in their history has owned a great business. They've made four or five times the money and they sold it to one of their competitors because they needed to get cash back.” – Michael [00:05]
• CVs as a Solution
  • CVs allow GPs to retain exceptional assets, providing LPs with liquidity options while maintaining upside potential.
  • GP proactively chooses to roll their proceeds into new vehicles rather than cashing out.

2. Risk Assessment & Underwriting Approach

• Private Equity vs. Secondaries Mindset
  • In CVs, underwriting is done like a buyout (bottom-up company diligence), not like traditional secondary LP portfolio investing (averaging across hundreds).
    • “You can’t use that average concept... You got to be right every time.” – Michael [02:54]
• Fundamental Shift in the Secondaries Market
  • Once a market about massive diversification, now fragmented into specialist subsegments including single-asset CVs requiring PE-level skills.

3. The Dual Skillset: Buyout and Secondaries Perspectives

• The “Hunter” vs. “Partner” Mindset
  • Direct PE investors approach deals with competitive intensity; secondaries investors must focus on partnership, trust, and alignment since they rely on the sponsor to continue operating the business.
    • “There are both hard and soft skills... this partnership orientation and the necessity for trust... are different and potentially conflict with the mindset and experience and skills of a PE investor.” – Michael [06:51]
• Passive Investment Post-Transaction
  • Lead investors in a CV become large, yet passive, not controlling, sitting on advisory boards (not operating boards).

4. Incentives and Conflicts of Interest

• The Built-in Conflict
  • GP sells out of the old fund, but buys into the CV — a potential conflict managed through transparent processes, lead investor credibility, and LP choice to roll over or cash out.
    • “That conflict... is really important to be open about and to manage.” – Michael [08:46]
    • Almost all CV deals succeed, with LPs rarely rejecting opportunities.

5. LP Dynamics

• LP Choice: Sell vs. Roll
  • LPs are often conflicted: desire for DPI vs. effort required to diligence a one-off deal.
  • “Market average today: 15–20% of LP capital is rolling, the rest takes liquidity.” – Michael [11:29]
  • LPs are generally happy to take large liquidity events, given DPI needs and the minimal tax downside (as most are tax-exempt).

6. Return Expectations & CV Deal Economics

• Performance Targets
  • CV buyers target “2x net MOIC and 20% IRR or better.” – Michael [13:22]
• Sponsor Alignment
  • GPs typically roll all proceeds (including carry) into the new CV, resulting in massive skin in the game (8–10%+ of new vehicle, often multiples of their original commitment).
    • “The only way that's economically rational is if they really believe that there is another three to four times the money from here.” – Michael [14:06]

7. Why CV Returns Can Be Superior

• Positive Selection Bias
  • Only the best, most proven assets are chosen for CVs — “the ones you know... are long-term compounders.” [16:43]
  • GP’s intimate knowledge of the asset lowers risk versus standard buyouts.
• Market Structure
  • Persistent supply-demand imbalance: more CV opportunities than available capital, likely to sustain strong returns.

8. Fee & Carry Structures

• Economics
  • Management fees: 50–70 bps (lower than standard PE buyout).
  • Carry Structures: Tiered; typically 10% carry >8% pref, 15% after 1.5x/15%, and 20% after 2x/20% pref. Upside and alignment but with meaningful hurdles.
    • “There is some inherent downside protection, at least in the carry structure which sponsors sign up to. That's a nice positive buy signal.” – Michael [25:05]

9. CVs in Venture Capital & Liquidity Constraints

• Liquidity Crunch in VC
  • Secondaries (including CVs) are crucial in venture, but risk of “life preserver” deals exists: i.e., using CVs to rescue companies that can’t be sold elsewhere may indicate structural weakness.
    • “The problem I'm less interested in solving is can't sell it today for one of the following long list of reasons... Almost a transaction from a position of weakness.” – Michael [27:36]
• Unlocking DPI Gridlock
  • CVs are imperfect, but they’re the “best of worst tools” for unlocking liquidity without destructive discounts or forced sales.

10. The Market’s Explosive Growth & Future

• Stats & Projections
  • Record secondary volume in 2025: $226B (up 40%); $50B+ of that in single asset CVs (67% YoY growth).
  • “At this pace, the CV market alone could top $200B in five years.” – Michael [29:41]

Memorable Quotes & Moments (with Timestamps)

• “Every sponsor at some point... has owned a great business... and sold it to one of their competitors because they needed to get cash back.” – Michael [00:05]
• “You can’t use that average concept... You got to be right every time.” – Michael [02:54]
• “There are both hard and soft skills... this partnership orientation and the necessity for trust... are different and potentially conflict with a PE investor.” – Michael [06:51]
• “Structurally, the general partner is a seller on one hand... and a buyer... on the other. That conflict... is really important...” – Michael [08:41]
• “On average... 15 to 20% (of capital rolls), I’ve seen as high as 100%, as low as 50%.” – Michael [11:29]
• “This is a market that ought to deliver two times the money net or better and a 20% IRR or better.” – Michael [13:22]
• “The only way that's economically rational [for a GP] is if they really believe there is another three to four times the money from here.” – Michael [14:06]
• “Only the best, most proven companies are selected for CVs — positive selection bias.” – Michael [16:43]
• “GPs are typically committing 8–10% of the capital... several times larger than in a regular way buyout.” – Michael [20:41]
• “Tiered carry structures... with inherent downside protection, sponsors have to perform, or carry is lower.” – Michael [25:05]
• “The problem I'm less interested in solving is can't sell it today... a transaction from a position of weakness.” – Michael [27:36]
• “Even if you halve the growth rate... the single asset part could be $200B or larger in five years.” – Michael [29:41]

Final Reflections & Personal Lessons

Discipline and Focus

• Avoid deals outside the core expertise — “It’s important to have discipline around where you have a real right to win.” – Michael [31:09]

Entrepreneurship and Culture

• Importance of loving the business, team, and embracing mistakes as learning opportunities.
  • “I've only ever learned through making mistakes.” [32:51]
  • “Build the business you want to work in for the rest of your life.” (David/quoting mentor) [34:02]

Advice for Younger Investors

• “Be less afraid to fail. The only way you can really learn is by acting and having a bias to action.” – Michael [37:40]
• Investing is an apprenticeship; quantity of experiences (“take 10x more meetings”) leads to quality and skill formation. [39:32]
• Building a culture where it’s safe to make (and surface) mistakes is crucial for team growth.

Timestamps for Key Segments

• [00:05] – Motivation for CVs: the GP perspective
• [00:55] – Adverse selection and investment approach
• [02:54] – Risk and skill differences: PE vs. secondaries
• [05:34] – Importance of secondary market skills
• [08:41] – Managing GP/LP conflicts and deal structure
• [11:29] – LP roll-vs-sell dynamics and market percentages
• [13:22] – Return targets and GP commitment rationale
• [16:43] – Why CVs can outperform traditional buyout
• [20:41] – GP alignment and skin in the game
• [24:40] – Fee and carry terms: structures and alignment
• [26:49] – CVs and liquidity for venture
• [29:41] – Market growth data and projections
• [31:09] – Discipline, “right to win,” and lessons learned
• [32:42] – Personal motivation, culture, and career lessons

Conclusion

This conversation is a masterclass on the rise of continuation vehicles and the importance of combining PE rigor with secondary market partnership skills. Michael’s perspective underscores the high alignment, rigorous process, dynamic risk/reward, and culture required for success in this rapidly growing market — as well as broader lessons about discipline, learning by doing, and building the right entrepreneurial environment within finance.