Continuation vehicles are emerging as a key liquidity tool in private credit, yet the majority of LPs are still opting to cash out amid rising market scrutiny. For many private credit investors faced with the options of rolling over their long-held investments into a continuation vehicle or exiting them, it's a no brainer: take the money.

More than 80 percent of institutional investors are using the exit option, similar to the participation rate in CVs overall, says Matt Swain, global co-head of equity capital solutions at investment bank and placement agent Houlihan Lokey. This high exit rate suggests a potential mismatch between the structure's intent and investor behavior.

The trend highlights ongoing uncertainty in private credit markets as limited partners prioritize immediate liquidity over extended hold periods. While continuation vehicles offer fund managers flexibility to manage aging assets, the overwhelming preference for cash exits underscores the challenges in aligning GP and LP interests in the current environment.