Why continuation funds are the new arsenal in investor strategies

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Mint. Other venture capital firms such as Kae Capital and Westbridge Capital are also considering similar moves, another person said. "We are in discussion with institutional investors and waiting for market interest to build up before we open the fund to a larger set of local investors," India Quotient's Anand Lunia said. Others did not respond to Mint's request for comment.

More recently, Chrys Capital raised a $700 million continuation fund for its stake in the National Stock Exchange. Other examples of such domestic funds include Samara Capital's $150 million fund that was raised last year, venture capital firm Blume Ventures' ₹200 crore fund. Continuation funds provide an exit for existing limited partners while allowing investors to remain invested in high-performing portfolio companies.

These funds support trophy assets that need more time to reach their full potential beyond the typical fund cycle. Since fund life cannot be in perpetuity as instructed by regulators, continuation funds become a very effective exit route for investors as it gives them a level of certainty on the kind of returns they will get. It also eliminates the early investment risk factor as they know the assets they are investing in as opposed to a traditional fund where general partners have to scout for new opportunities.

"There are quite a few continuation vehicles (CV) that are in the works," said Siddharth Shah, Partner, Khaitan & Co. “This is an exit route that is being evaluated very proactively by several fund managers and limited partners because many are sitting at the end of a fund life cycle with a few assets that still have some runway left for maximising their returns and hence present an opportunity in a CV. We expect to see a