Key Takeaways

  • Patrick Krajci at Alter Domus warns that finance teams consistently underestimate the preparation required before investor election notices go live, especially across multi-vintage portfolios.
  • Carried interest crystallization and GP economic alignment draw immediate scrutiny from LP Advisory Committees (LPACs) long before paperwork reaches external limited partners.
  • Incumbent funds and new vehicles must maintain parallel data and accounting flows rather than executing a clean legal asset handoff.
  • Investor election windows can run as tight as 14 days, forcing operations teams to process roll-or-exit decisions in a compressed burst.
  • Total equity and debt distribution numbers remain unsettled until the final LP ballot arrives, compressing cash effectuation into narrow closing windows.

Legacy Fund Agreements Create Hidden Friction Before the PDF Ships

Private equity CFOs often view a continuation vehicle as a bespoke transaction that starts once terms are circulated to investors. Krajci sees the operational breakdown occur months earlier. When a sponsor pulls assets out of older flagship vehicles, they rarely pull from a single fund structure with uniform rules. They frequently bundle assets held across distinct vintage funds, each bound by separate limited partnership agreements (LPAs), legacy hurdle rates, and different fee schedules.

Before an investor sees an election form, the finance team must untangle how these legacy agreements interact with the new vehicle. Krajci points out that the incumbent structure does not simply disappear when the deal prices. As Krajci notes, “The first thing we think about is just the information flows of the existing fund and the new vehicle, because ultimately you are not just gonna remove the incumbent vehicle that's holding the asset today.” (play from 6:10) Running parallel accounting books across both structures requires clean data pipelines that many mid-market back offices lack.

The earliest pressure point centers on carried interest. LPACs and external legal counsel demand complete clarity on whether the general partner crystallizes carry now, rolls it into the new vehicle, or defers realization. Krajci observes, “From a CFO finance perspective, understanding carried, carried interest in GP economics, that will be one of the first things that legal counsel, the LPAC, when they start thinking about the formation of a CV, is making sure the alignments of, of everyone are kind of equitable.” (play from 6:57) If the GP calculates its carry split or basis incorrectly, the entire governance approval stalls.

Fourteen Days to Model Carried Interest and Route Cash

Once terms are agreed, the operational timeline collapses. Many sponsors give their existing limited partners a narrow 14-day window to elect whether to roll their interest into the new continuation vehicle or cash out entirely.

During this two-week sprint, finance teams face extreme operational pressure. “The amount of work that we see CFOs and their finance team do way before that PDF goes out to the pension fund or the investor base to say, 'Please tell me what you want,'” (play from 8:38) Krajci explains. The real challenge hits when those responses trickle in. Institutional investors often return documents on the final afternoon of the election period. Until every document is in hand, the CFO cannot finalize total rollover equity, syndication sizes for secondary buyers, or the precise cash needed to cash out exiting LPs.

As Krajci explains, “So what I tell a lot of our, our CFOs that we work with is you don't know the final amounts till the last piece of paper comes in from the LP base to say, 'I want to roll,' or, 'I want to cash out.'” (play from 11:14) When the final form arrives, the operations team must immediately balance the ledger, call capital from incoming secondary buyers, clear subscription credit facilities, and wire distributions to exiting investors. Krajci emphasizes the immediate shift: “Some clients may have a fourteen-day window to send something out to their investors to say, 'Do you want to roll? Do you want to exit?' And so a lot has to happen in a very short period of time, and once that deal closes, it's okay, we've got to now effectuate cash.” (play from 7:52)

Why It Matters

Continuation vehicles are no longer exceptional liquidity events reserved for top-quartile mega-funds; they are becoming standard portfolio management tools across mid-market private equity. As hold periods lengthen and secondary buyers demand faster executions across multi-asset pools, back-office administration becomes a gating factor for deal completion. Sponsors that lack automated fund administration and live cash forecasting risk governance disputes with LPACs, delayed closes, and stranded capital during final settlement.