ILPA’s 2026 Continuation Vehicle Guidance: What Changed and Why
When a GP transfers an investment between funds it controls, it influences both sides of the transaction. Existing LPs need evidence that the price, process, and new terms serve their interests.
ILPA’s June 24, 2026 draft builds on its 2023 guidance with more detailed expectations for commercial rationale, pricing, investor elections, and sponsor economics. The GP should demonstrate why the CV offers a better outcome than the alternatives considered, supported by calculations that LPs can assess.
Status, October 18, 2026: The consultation closed August 5. ILPA still describes the guidance as a draft and expects final publication later in 2026. The proposals are nonbinding industry standards. Transaction rights and approvals depend on the governing documents and applicable law. ILPA draft and status.
1. What changed from 2023 to 2026?
The 2023 guidance already contained specific protections for LPs.
| Issue | 2023 guidance already addressed | 2026 draft emphasis |
|---|---|---|
| Commercial rationale | Explain the CV choice against alternatives, including an extension or traditional exit | Stronger documented support for the CV’s economic merits against alternatives considered |
| LPAC involvement | Early engagement, 10-business-day review, private deliberations, and independent advice | More formal oversight, documented deliberations, and continuing LP engagement |
| Price discovery | Competition, third-party validation, bid disclosure, and reasons for selecting the winner | More detailed pricing evidence, including anonymized final-round bids and their material terms |
| Election period | At least 30 calendar days / 20 business days | At least 30 business days after the complete election package, with more time where warranted |
| Investor elections | Sell, roll, add capital, or combine elections; preserve rolling LP economics | Five alternatives on a comply-or-explain basis, including remaining in the original fund |
| GP reinvestment | Generally roll 100% of accrued carry; explain departures | Expressly address sponsor-commitment returns and disclose GP de-risking |
| Disclosure | Information parity, valuation support, and fee amounts in dollars | Expanded election materials and comparative modeling, alongside the January 2026 disclosure template |
| Expenses | Allocate by benefit, include GP cost sharing where appropriate, and address failed deals | More detailed allocation analysis and scrutiny of costs incurred before LPAC engagement |
Baseline: ILPA’s May 2023 guidance. Proposed changes: June 2026 draft materials and Kirkland’s September 2026 analysis.
LPAC review checklist
My assessment: the most useful application is a documented comparison of the CV’s net economics with other liquidity solutions. I would use these questions to organize the review.
| Question | Evidence to examine |
|---|---|
| Why choose the CV? | Sale, CV, NAV financing, preferred equity, and extension economics, including costs and retained exposure |
| Is the transfer price defensible? | Competitive bids, independent valuation, forecasts, and material transaction conditions |
| Are rolling LPs protected? | Before-and-after fee, carry, expense, and return calculations |
| Does the GP retain meaningful exposure? | Carry reinvestment, sponsor commitments, and financing of those commitments |
| Can the structure perform? | Forecasts, financing terms, follow-on capital needs, and exit assumptions |
2. Commercial rationale and pricing
Explain why the CV is preferable to the alternatives
Suppose Fund I is nearing the end of its life and holds a company with an estimated equity value of $500MM. LPs want distributions, and the GP proposes a $500MM transfer to a CV. The company’s remaining growth potential is part of the rationale; LPs also need to see what other routes were considered and their net economic consequences.
| Alternative | Value or capital raised | Cash available for LP distribution | Retained exposure or obligation |
|---|---|---|---|
| Sell company | $475MM sale price | Sale proceeds after carry, costs, taxes, and other deductions | Exit the investment |
| Continuation vehicle | $500MM transfer value | Depends on sell/roll elections, carry, costs, taxes, and funding arrangements | Rolling LPs retain exposure; GP continues managing the asset |
| NAV financing | $150MM loan proceeds | Proceeds permitted for distribution after costs and required uses | Fund retains the company and owes principal and financing costs |
| Preferred equity | $125MM financing proceeds | Proceeds available under the negotiated terms, after costs | New investor receives priority over specified cash flows |
| Fund extension | $0 new capital | $0 immediate liquidity in this example | Retain the company and postpone distributions |
Hypothetical assumptions, not market quotes. The $500MM CV transfer value is not automatically $500MM of cash distributions. Financing proceeds also create continuing obligations or priority claims.
If buyers offer $475MM for an outright sale and CV investors agree to a $500MM valuation, the GP should compare fees, taxes, timing, transaction certainty, rollover terms, and future capital needs. The analysis should explain how retaining the asset benefits existing LPs and how additional management fees affect their returns. A defensible CV choice can depend on more than the highest headline price.
Show how the price was established
The draft favors competitive price discovery supported by independent valuation work and an anonymized summary of final-round bids. LPs should be able to assess cash consideration, deferred payments, earn-outs, and legal conditions. A fairness opinion alone does not establish that the most attractive executable terms were obtained.
Example: compare executable economics. Two investors offer the following terms for the same investment.
| Offer terms | Investor A | Investor B |
|---|---|---|
| Headline purchase price | $525MM | $500MM |
| Cash at closing | $400MM | $500MM |
| Deferred consideration | $125MM | None |
| Payment timing | Three years | N/A |
| Present value at an illustrative 10% | $493.9MM | $500MM |
Investor A’s additional $25MM of headline consideration is outweighed by the delay on these assumptions. Contingencies or credit risk could further reduce the deferred payment’s value. LPs also need an explanation if the GP transfers an asset carried at $600MM NAV for $500MM, a 16.7% discount.
3. LPAC oversight and investor elections
Give the LPAC time, information, and independent advice
The 2026 draft proposes more formal LPAC oversight through early engagement, materials at least 10 business days before a conflict vote, live meetings, private deliberations, independent advisers, and documented review. Several protections, including a 10-business-day review and private deliberations, were already in the 2023 guidance.
The LPAC’s own conflicts also need attention. A member whose affiliated secondary fund bids for the asset may benefit from a lower price. The process should identify that conflict and explain how the member participates in deliberations and voting. The LPAC’s powers, duties, and approval thresholds depend on the LPA and applicable law.
Offer meaningful elections and explain unavailable options
The draft identifies five alternatives on a comply-or-explain basis:
| Election | What it means |
|---|---|
| Sell | Receive cash and exit |
| Roll without additional capital | Transfer existing exposure into the CV |
| Roll with additional capital | Maintain exposure and provide fresh capital |
| Partial sell and roll | Choose how much exposure to monetize and retain |
| Remain in place | Continue holding through the original fund |
For an LP with a 10% interest in Fund I, remaining in place could preserve its exposure through Fund I and the original structure’s terms. Rolling transfers exposure into the CV. Parallel ownership can create conflicting funding needs, governance rights, and exit preferences; a buyer seeking full control may reject it. The draft allows GPs to explain why an option cannot reasonably be offered.
| 2023 guidance | 2026 proposal |
|---|---|
| 30 calendar days / 20 business days | 30 business days, approximately six weeks |
The proposed period begins after delivery of the complete election package, with longer periods contemplated for complex transactions. It gives LPs more time for investment committee, legal, tax, and valuation review while extending execution timelines.
4. Fees and GP alignment
The principle that rolling LPs should be no worse off already appeared in 2023, along with specific fee and carry protections. The 2026 draft calls for more explicit comparative support, including the effects of fee step-downs, carry thresholds, and other changes. LPs need the dollar impact over the expected holding period.
Fee-reset example. Assume the investment’s allocated annual management fee in Fund I is $2MM. A new 1.5% fee on a $500MM CV base produces $7.5MM annually, an increase of $5.5MM per year or $22MM over four years if the base stays constant. Additional work may justify additional compensation, but the comparison should show its effect on rolling LP returns and the protections offered.
Carry and sponsor reinvestment. The draft addresses reinvestment of crystallized carry and returns from existing sponsor commitments, generally expecting full reinvestment with departures explained. The 2023 guidance already generally called for 100% carry rollover. The expanded focus includes sponsor-commitment proceeds and disclosure of financing that materially reduces the GP’s own capital at risk.
If a GP takes $50MM of carry in cash while LPs roll for another five years, it reduces its exposure while those LPs remain invested. Reinvesting that $50MM keeps the GP exposed to future gains and losses. The transfer price still needs independent scrutiny.
5. Disclosure and transaction expenses
Give existing LPs the information needed to underwrite
Information parity was already a 2023 expectation. The 2026 draft develops the election package further, covering transaction terms, valuations, financial models, tax information, CV governing documents, and material economic changes. It sits alongside ILPA’s Continuation Fund Disclosure Template, introduced in January 2026. Existing LPs should receive substantially equivalent material diligence information to new buyers, subject to legitimate legal and confidentiality restrictions.
For a private credit CV, I would examine the asset tape, borrower exposures, cash versus PIK interest, amendments, nonaccruals, maturities, valuations, and portfolio financing. For a private equity CV, I would examine enterprise value, EBITDA adjustments, forecasts, leverage, multiples, exit assumptions, and prior market evidence. These are my underwriting applications of ILPA’s transparency principles.
Show who pays, including when a process fails
Advisory, legal, valuation, tax, formation, insurance, and lender-consent costs can reduce the transaction’s value. On a $500MM transaction with $8MM of expenses, charging the legacy fund all $8MM reduces its proceeds by that amount. Sharing costs with CV investors or the GP produces different outcomes for selling and rolling LPs.
The draft adds detail to expense allocation and scrutiny of costs incurred before LPAC engagement. The earlier guidance already linked allocation to the parties benefiting and addressed GP cost sharing and failed transactions. LPs should see the allocation, its rationale, and their exposure if a process ends without generating liquidity.
6. Industry response
Kirkland & Ellis’s September 30, 2026 critique supports transparency and governance while arguing that prescriptive procedures can increase costs, delays, and failed-deal risk. Its main concerns are longer election periods, the ownership complications of remaining in place, and the difficulty of preserving identical economics across tax regimes, waterfalls, jurisdictions, and asset classes.
The CFA Institute’s August 7, 2026 comment letter supports stronger disclosure, competitive price discovery, LPAC oversight, and protection for rolling LPs. For investors, the practical judgment is whether the proposed process improves decisions enough to justify its costs and execution risks.