ILPA raises the bar on continuation vehicles

In October 2026, the Institutional Limited Partners Association (ILPA) published Continuation Vehicles: Advancing Alignment through Best Practices, updating its 2023 guidance on GP-led continuation vehicle (CV) transactions following an extensive comment period¹. The timing is significant: CVs represented roughly 14% of sponsor-backed exits globally in 2025, with LPs expecting that this percentage will continue to significantly increase².

What you need to know

• ILPA’s final guidance preserves GP flexibility (including in relation to follow-on funding, fixed election options, and price validation), while expecting departures from that guidance to be explained to LPs.
• LPs should generally receive at least 20 clear business days to make their elections.
• Rolling LP economics remain a core focus, with fee and carry changes requiring clear disclosure and modelling.
• LPACs should remain focused on conflict oversight, rather than negotiating CV terms.

How the guidance compares with previous practice and the June 2026 draft

The 2026 guidance replaces ILPA’s May 2023 Continuation Funds guidance, which in some respects has served as a go-to reference point for CV transactions since 2023, as discussed in our previous bulletin. In June of this year, ILPA published updated draft guidance, which was subject to comment by the industry. The chart below tracks certain key issues from the 2023 guidance, through the June 2026 draft to the final October 2026 guidance.

How ILPA responded to sponsor concerns

Sponsors raised several practical objections to the June 2026 draft during the comment period.

The final guidance accepts many of their concerns, particularly on process mechanics, while holding firm on the core economic tests for rolling LPs, as follows:

• Principles, not rules. Sponsors argued that the draft’s “comply or explain” approach would be hard to follow in practice. The final guidance describes itself as principles-based, preserves GP judgment, and states that non-conformity is not in itself a sign of a flawed process, although GPs that materially depart from it should still be ready to explain how LP concerns were addressed.
• Election period. Sponsors warned that a 30-business day minimum would hinder deal execution and benefit buyers. The final guidance reverts to 20 clear business days and acknowledges that longer periods can make the reference-date valuation stale and prompt buyers to seek material adverse change (MAC) clauses, price adjustments or holdbacks.
• “Remain in place”. Sponsors argued that parallel exposure between the existing fund and the CV both holding the same asset(s) would impair pricing, require significant LPA amendments, and create new conflicts. The final guidance adopts much of that reasoning.
• Election mechanics. The draft’s prohibition on mandatory top-ups to the CV and fixed sell / roll splits in the election packet was criticized as creating funding and dilution risk. The final guidance permits follow-on funding as a condition to roll where it is central to the CV thesis, and it also accepts fixed percentage options in the election packet to provide additional deal certainty.
• Price discovery. Sponsors pushed back on treating fairness opinions as standard deliverables and on requiring broad auctions, noting that a targeted process or a single motivated buyer can produce a better outcome. The final guidance allows a strong competitive process to stand in for a fairness opinion and permits targeted processes if explained.
• Role of the LPAC. Sponsors objected that casting the LPAC as a “gatekeeper”, with its own financial advisers and multiple LP town halls, overstated its traditional conflict-clearance role and would add cost and delay. The final guidance limits the LPAC to evaluating the GP’s conflict management and reserves independent advice for cases where the transaction’s complexity justifies it.
• GP carry rollover. Sponsors noted that less than full rollover can reflect departed employees, tax, or legacy holdings rather than weak alignment. The final guidance moves from the push for “all crystallized carry” to a “significant and meaningful portion”, net of tax and excluding leavers.

Key takeaways

For GPs

• Review internal CV and conflicts policies against the guidance, and plan timetables around the 20 clear business day LP election and 10 business day LPAC approval benchmarks.
• Prepare comparative fee and carry modelling and with-CV / without-CV GP economics early, as these are now expected to be central to the election pack.
• Revisit election form template for broad waivers, unknown-claim releases, and no-reliance language (which should not be contemplated per the final guidance).
• Where a process departs from the guidance, prepare to explain how LP concerns have otherwise been addressed.

For LPs

• Build an expedited CV underwriting and approval framework internally, and keep contact details current with GPs so that notices are acted on promptly.
• Consider updating side letter templates for new primary fund commitments to secure minimum election periods, disclosure template information, and consistent tax treatment (and, depending on the context, potentially also consistent economic arrangements).
• Resist CV-specific pre-clearance language and challenge warehousing or cross-trade provisions included in new LPAs.
• LPAC members should be prepared to condition or withhold waivers to CV processes, and should understand the fund’s escalation and dispute resolution mechanisms.

Avoid signing election documents without legal review, even when seeking liquidity.

Looking ahead

The guidance is not binding, though given ILPA’s role in the market, it is likely to become a key reference point against which LPs, LPACs, and buyers assess CV processes. Sponsors planning CVs should anticipate these expectations to feature prominently in LPAC discussions and LP negotiations moving forward.