BCI's New PE Head Shakes Up Continuation Fund Formula

 Jessica Hamlin of PitchBook reports BCI's new PE head shakes up continuation fund formula: 

The new head of private equity at British Columbia Investment Management Corporation is betting that liquidity maneuvers, such as continuation funds, are here to stay.

BCI’s PE unit, which oversees at least C$36 billion ($25.7 billion), announced on May 28 the launch of a private capital solutions group.

Under the leadership of Jon Salon, the new group will fund preferred equity issuance and recapitalizations, invest in continuation vehicles and take minority stakes in companies, as part of a strategic response to the prolonged liquidity shortage in private markets.

“There’s this perfect storm of challenges and opportunity,” Salon told PitchBook.

The capital solutions group is Salon’s first major initiative as PE head since his appointment in January, when he replaced Jim Pittman. Pittman led the program for a decade, growing it from C$7 billion AUM.

“We said, what are the GPs doing? What is Leonard Green doing and Warburg and New Mountain? They’re setting up captive structured equity groups and structured [continuation vehicle] groups. Why should we be any different?” Salon said.

Amid PE’s multiyear liquidity crunch, most exits have been driven by large transactions, leaving middle-market players holding onto their assets for longer and longer and leading to a growing need for liquidity from LPs.

The secondary market has grown exponentially in response to LPs’ liquidity demands. Total secondary transaction volume reached a record $226 billion in 2025, $106 billion of which came from GP-led transactions, according to secondary adviser Evercore.

BCI was the anchor investor in the debut secondaries fund of Painswick Capital Management, a partnership between buyout firm AEA Investors and AEA chairman and partner John Garcia to invest in continuation vehicles centered on middle-market portfolio companies.

The pension fund manager also puts new money into continuation funds raised by its own GPs, where it can cash out or roll into the new vehicle, along with GPs outside its portfolio.

The PE team at BCI has seen an increase in the number of structured equity deals and single-asset continuation vehicles in its own pipeline, Salon said. Historically, traditional middle-market and large-cap buyouts comprised about 90% to 95% of the pension fund manager’s pipeline. Today, 20% to 25% of that has been taken over by structured equity and continuation vehicles.

For the one-year period ending in December 2024, BCI’s PE program underperformed its custom benchmark by 10 percentage points, its most recent fund performance report shows.

The total pension plan returned 10% for the period, missing its 12.3% benchmark.

In his fiscal year 2025 letter, CEO and CIO Gordon Fyfe attributed the underperformance to a steep benchmark driven up by strong public equity returns from the Magnificent Seven technology stocks.

PE benchmarks compare returns to comparable public companies.

This was true across the “Maple 8,” Canada’s largest pension funds, most of which underperformed their PE benchmarks for the fiscal year.

Still, the operating cash flow of BCI’s private equity program was in the green for the period, suggesting it is returning capital from somewhere—either through fund distributions or secondary sales. This means BCI brought in more cash from the program than it deployed last year. 

I've already discussed BCI's launch of its Capital Solutions Group here.

I discussed the structural reasons as to why continuation funds are at an eight-year high, mostly owing to muted exits. 

More recently, Jim Caraluzzi of Penn Mutual Asset Management discussed the structural forces driving continuation fund growth:

The private equity industry is grappling with a backlog of more than 13,300 portfolio companies, reinforcing the need for alternative liquidity solutions that can bridge the gap between value creation and exit execution.¹ As highlighted in today’s Chart of the Week, continuation fund activity, measured by both transaction volume and deal size, has continued its upward trajectory, driven by a challenging deal-making environment.² This growth has intensified recently amid heightened macroeconomic and geopolitical uncertainty, as well as growing concerns around the disruptive impact of artificial intelligence (AI) on traditional business models. These dynamics have contributed to persistent bid-ask spreads and tempered buyer risk appetite.

The continued expansion of continuation funds reflects more than sponsor preference; it is increasingly a function of necessity. With exit markets remaining challenged and initial public offering activity largely closed, sponsors face a growing mismatch between fund life cycles and asset readiness. Continuation funds may also be a byproduct of a higher-valuation private equity ecosystem.³ With acquisition multiples remaining elevated and higher financing costs, sponsors often require additional time to execute operational initiatives, drive earnings growth and fully realize value creation plans.

While demand remains strong for assets with durable growth and resilient earnings, sponsors have become reluctant to exit their highest-conviction companies at valuations that may not fully reflect the long-term value creation potential. This dynamic may help explain why activity in recent years suggests a clear shift in preference toward single-asset continuation vehicles rather than multi-asset portfolios, which generally offer cleaner underwriting and the ability to diligence specific company-level attributes such as durability of earnings, secular growth exposure and downside protection. Within that context, single-asset continuation funds provide limited partners (LPs) with targeted exposure to “trophy” assets and enable general partners (GPs) to extend ownership of their strongest performers.

The growth of continuation funds should also be viewed in the broader context of the institutionalization of secondaries markets. As LPs increasingly seek liquidity, shorter-duration exposure and more predictable deployment profiles, secondary strategies have moved from a niche allocation to a core portfolio component. Continuation vehicles represent one manifestation of this trend, sitting alongside LP-led secondaries and evergreen private market products as part of a broader evolution toward more flexible forms of private capital ownership.

Key Takeaway

Continuation funds have evolved from a tactical portfolio management tool into a structural feature of the private equity ecosystem. Persistent exit challenges, elevated hold periods, valuation uncertainty and growing LP demand for liquidity have created an environment where traditional fund timelines no longer align with asset ownership realities. As secondaries markets continue to mature and capital increasingly concentrates around high-quality assets, continuation vehicles are likely to play an increasingly important role in private equity capital formation, liquidity management and value realization.

 In short, it is "the perfect storm of challenges and opportunities," as Jon Salon notes above and instead of sitting on the sidelines, BCI's PE team is looking at what top GPs are doing and emulating them:

“We said, what are the GPs doing? What is Leonard Green doing and Warburg and New Mountain? They’re setting up captive structured equity groups and structured [continuation vehicle] groups. Why should we be any different?” Salon said. 

Will they succeed in this new environment and generate solid returns for BCI? 

Hopefully, that is why they introduced this Capital Solutions Group, but success is far from assured in this environment.

It all remains to be seen but at least BCI's PE team isn't sitting back waiting for the winds of change to hit the private equity industry.

They know it's a tough environment and they're trying to address structural issues head-on by funding preferred equity issuance and recapitalizations, investing in continuation vehicles and taking minority stakes in companies, as part of a strategic response to the prolonged liquidity shortage in private markets.

So kudos to Jon Salon and his team, they're not sitting there waiting for the cycle to turn, they're adapting to structural changes in the industry.

Below, what if the biggest opportunity in private equity today isn’t buying companies—but buying liquidity from investors who are forced to sell great assets for reasons unrelated to performance?

In this episode, David Weisburd sits down with Ryan Levitt, Co-Head of LP Secondaries at ICG, to discuss why secondaries have evolved into one of the most attractive areas in private markets. Levitt explains how LP secondaries can outperform traditional buyouts with lower downside risk, why DPI pressures are reshaping institutional portfolios, and how rules-based allocators create structural inefficiencies. 

They also explore return dispersion, continuation vehicles, GP relationships, and why access and information matter more than sourcing in modern secondaries investing.

Very interesting discussion, take the time to listen to it. 

Next, Yann Robard, founder of Dawson Partners, formerly of CPP Investments, discusses navigating liquidity in private equity with 9fin' The Credit Clubhouse.

Lastly, listen to another clip here on why continuation funds make sense, especially when you don't want to sell a great asset to a competitor and then have a hard time finding a new one.

Update: Andrew Claerhout, former head of Infrastructure and Natural Resources at OTPP now at BCG, shared these insights with me after reading this comment:

I think this strategy makes tremendous sense, and I’m somewhat surprised more large, sophisticated institutional investors haven’t evolved toward becoming broader “GP solutions” providers rather than remaining primarily LPs and co-investors.

The model fundamentally changes the nature of the GP relationship. Instead of always being on the receiving end of opportunities and asking for allocations or co-investments, the investor becomes a provider of solutions to a GP’s capital and liquidity challenges. That creates a much deeper, more strategic partnership and should strengthen relationships with core managers over time.

While Jon Salon certainly deserves credit for accelerating and formalizing the strategy, I don’t view this as a radical departure for BCI. My impression is that BCI was already fairly advanced in this direction under Jim Pittman, particularly in its willingness to pursue more flexible and creative structures. To me, this feels less like a new strategy and more like the next logical evolution of an existing one.

Given the persistent exit backlog across private equity and the growing importance of GP-led transactions, continuation vehicles, preferred equity, and other capital solutions, this seems like a natural area for large, well-capitalized institutions with long investment horizons to lean in.

I thank Andrew for his wise insights and agree with him that more sophisticated LPs should follow BCI's lead here, and this is an extension of what Jim Pittman had implemented at BCI.