Continuation vehicles: ILPA's transparency push and wider valuation developments

Continuation vehicles are now a familiar part of the private capital market. As they have grown in frequency and complexity, so too has the attention from investors and regulators. In June 2026, the Institutional Limited Partners Association (ILPA) published draft new continuation vehicle (CV) guidance, updating its 2023 version to promote best practice industry standards around transparency, governance and process. The public comment period closed on 5 August 2026, with final guidance expected later this year. It remains to be seen how closely the final guidance resembles this draft; however this article pulls out the key themes from the 2026 draft and explores the wider regulatory focus on valuations.

Key changes in the draft 2026 guidance

The 2023 guidance and 2026 draft guidance documents share two core principles. First, CV transactions should maximise value for existing limited partners (LPs), and second, rolling LPs should be no worse off than if the transaction had not occurred. The 2026 draft goes further, adding a third principle: general partners (GPs) must show that the CV is a "deliberate choice" that best maximises value compared to alternatives actually considered at the time, not simply a default exit route. In practice, this means GPs will need to evidence the alternatives considered, such as a trade sale, secondary sale or initial public offering (IPO), and articulate why the CV was determined to best maximise value for LPs, reinforcing the broader push for greater transparency in the decision-making process.

Economic terms

Both sets of guidance restrict any overall increase in management fees or carried interest for rolling LPs and require crystallised carry to roll into the new vehicle. The 2026 draft strengthens this by requiring that no increase is evidenced in "absolute dollar amount" terms - a more specific standard that should be easier for LPs to verify. On election economics (the financial trade-offs, incentives and costs that existing LPs face when deciding whether to remain, sell or roll over), the 2026 guidance stipulates that if the GP’s proposal omits any of these available options, it must justify the omission on a "comply or explain" basis.

Disclosures

The 2023 guidance called for disclosure of investment memos, valuation bases, GP views on returns, and performance of prior continuation funds. The 2026 draft significantly expands the disclosure framework via the mandatory "ILPA Continuation Fund Disclosure Template," which must be provided to all LPs no later than the sell/roll decision point. This should be accompanied by a defined "election pack" containing a confidential information memorandum (CIM), independent valuation report, leveraged buy-out (LBO) model, tax structuring memorandum, subscription and election agreements, and the CV's limited partnership agreement (LPA).

As a result of the feedback ILPA has received from LPs, there is a desire to tackle a perceived information asymmetry. It is reported that new CV investors may receive better diligence access than existing LPs who are being asked to sell or roll. In addition, ILPA is proposing for the election period to be extended to a minimum of 30 working days (previously 30 calendar days, so effectively an extension of around two weeks).

Running in parallel with the CV consultation, ILPA is also consulting on an updated Portfolio Company Template, which standardises the metrics and information that LPs need to evaluate underlying assets. The two consultations share a common theme around improving transparency for LPs and reducing potential information asymmetry that can arise when GPs control both access to data and the timing of key decisions.

Conflicts of interest

The 2026 draft adds more specific conflict scenarios not addressed in the 2023 guidance, including where the Limited Partner Advisory Committee (LPAC) members act as lead investors (for example, where an affiliated secondaries business bids on CV assets), and heightened scrutiny for repeated CV transactions within the same portfolio. It also introduces detailed LPAC engagement best practices, such as live formal meetings instead of written consents, in-camera sessions, and equal treatment of all LPAC members without staggered disclosures.

Other notable additions

The 2026 guidance introduces several areas the 2023 guidance did not cover in similar depth, for example, co-investment treatment in CV transactions (which has seen renewed focus from a co-investor perspective); ancillary or related transactions affecting target assets; the impact of a CV on the existing fund (including transaction cost-sharing, warranty and indemnity (W&I) insurance costs, lender consents, and impact on the carry waterfall); and a comparison of key CV governance terms (LPAC composition, transfer restrictions, GP removal rights) against the existing fund's LPA.

Valuations - increasing scrutiny, increasing expectations

The valuation of portfolio assets transferred to continuation vehicles sits at the heart of the governance challenge. As a result of the selling fund and the buying fund being controlled by the same GP, there is a potential conflict of interest that highlights the importance of independent pricing validation.

Fairness opinions and independence

Related-party and fund-to-fund transactions inevitably raise questions about independence. The market’s answer has been a rise in fairness opinions – an independent assessment of whether deal terms are financially fair. LPACs now routinely commission them as best practice, often as a condition of granting a conflict waiver. Fairness opinions remain more common in the US than in Europe, but LP expectations are converging globally.

CVs as a catalyst for improved valuation practices

Continuation vehicles give fund managers a good reason to revisit their valuation policies. Investors increasingly expect robust valuation governance, clear methodology documentation, and careful management of conflicts.

The Financial Conduct Authority's (FCA) multi-firm review of private market valuation practices, published in March 2025, found that robust processes showed evidence of independence, expertise, transparency, and consistency. But it also flagged gaps, particularly in documenting valuation-related conflicts beyond fees and remuneration, such as conflicts linked to marketing, secured borrowing, asset transfers, and performance incentives. Valuation methodologies vary across the market, with some managers using approaches such as amortised cost for private debt. The regulatory direction of travel favours marking to fair value where practicable.

UK regulatory developments: removing barriers to third-party valuation

HM Treasury's (HMT) draft statutory instrument reforming the Alternative Investment Fund Managers (AIFM) Regulations, published in July 2026, proposes to remove the unlimited liability provision that currently applies to external valuers. Under the existing regulations, third-party valuers face unlimited liability for any losses caused by negligence or intentional failure to perform their tasks. The response to the Government's April 2025 consultation was near unanimous that this risk had prevented the market for external valuers from developing. The removal of this provision should encourage greater use of independent third-party valuers in the UK. This development should in turn support the integrity of CV pricing processes.

The FCA's consultation paper CP26/28 (also July 2026) proposes to extend valuation rules to all AIFMs, including smaller firms not currently subject to specific requirements. The FCA observed that while most firms meet good standards, there is room for improvement in some areas. For smaller managers running continuation vehicles, this signals a shift towards consistent valuation standards across the market, regardless of firm size.

In summary

While the final guidance may evolve from the current draft, ILPA’s current proposals signal a clear direction of travel in establishing market norms for continuation vehicles. For GPs, the practical impact is likely to be felt most acutely in the disclosure requirements, the clear articulation of why the CV represents the best route to value realisation, and the focus on valuations. The regulatory tailwinds in the UK, through HMT's removal of unlimited valuer liability and the FCA's extension of valuation requirements to all AIFMs, underline a developing ecosystem for pricing and validating these transactions.

ILPA’s final guidance is expected later in 2026 and will be worth monitoring closely.