Vestar Delays New Fund Amid PE Slowdown, Leaning Into Continuation Vehicles

Vestar’s decision to defer launching a new flagship fund (its eighth) and instead focus on its existing portfolio is a signal decision in this private equity (PE) cycle. The firm is responding to two main pressures: underwhelming results for its most recent vintage, and an LP market that demands liquidity and returns before making fresh capital commitments. Fund VII, seeded in 2018, has yet to generate strong distributions, with a DPI (Distributions to Paid-In) of 0.42× and moderate TVPI (Total Value to Paid-In) of 1.24× as of late 2024. By contrast, Fund VI shows healthy realized returns. [1]

Supplementing this is Vestar’s completion in April 2024 of a $1.2 billion single-asset continuation vehicle for its investment in Circana, with lead investors Blackstone Strategic Partners and HarbourVest. The structure offered LPs options to redeem or rollover; it also allowed Vestar to free up cash and reset valuation expectations for one of its largest portfolio assets. This reflects the broader trend of GPs using secondaries/continuation vehicles to deliver liquidity in an illiquid exit environment. [1][6][11]

Strategically, this approach conserves resources, allows the firm to direct operational attention toward value creation rather than fundraising, and positions Vestar to capitalize on favorable acquisitions within its existing platforms. However, it carries risks: the opportunity cost of new investments forgone; the potential for internal strain if portfolio companies underperform; and the possibility of being outpaced by competitors more aggressively deploying capital during any easing of fundraising headwinds.

Contextually, Vestar’s move is consistent with data from McKinsey, PEI, S&P Global, and others showing global fundraising has declined, fewer new funds closing, longer fund-raise timelines (often 18-20 months), and increasing preference for continuation vehicles and other liquidity options. [4][2][11] For many buyers, middle-market firms are retaining portfolio companies longer to avoid exits at depressed multiples. For LPs, distributions have been constrained and dry powder remains high. Meanwhile, LPs are increasingly allocating capital to proven managers. Vestar falls into the latter category but is adjusting its mode accordingly. [2][10][11]

Open questions persist: when will macro conditions (interest rates, inflation, deal multiples) shift enough to justify launching a new fund? How much upside remains in Vestar’s existing portfolio, especially in firms like Circana? Will Vestar pivot strategically (e.g., scale back staff, reorganize investment teams) if the environment continues to deteriorate? And how will this decision affect the firm’s relationships with LPs who may prefer GPs to stay focused on firm growth via new funds?