Continuation funds for real estate fund managers
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In the current global economic climate, continuation funds provide an attractive alternative exit opportunity for real estate fund managers looking to create liquidity for investors in their funds.
In a closed-ended real estate fund context, continuation funds historically referred to the extension or roll over of substantially all of a fund’s portfolio either in the same vehicle or into a new vehicle. More recently, continuation funds are being used to describe a situation where the manager continues to manage a specific asset or sub-portfolio of assets of an existing fund in a different fund vehicle.
Whilst conflict of interest issues are inherent in continuation funds and arguably the most significant issue to contend with, an agile fund manager can overcome these with a clear and precise strategy.
Other key issues to consider are confidentiality, taxation and handling both negotiations with new or existing investors and the numerous moving parts this type of transaction involves.