• Fund III closed on target at USD 195m, 10 investments completed so far
• Continuation vehicle deals driven by liquidity needs, market acceptance
• Rapid deployment means GP could return with Fund IV within 12 months

Ion Pacific has served as a source of liquidity for VC investors for nearly a decade, often through preferred equity structures. Such is the glut of yet-to-IPO positions in soon-to-expire funds, the firm has added continuation vehicles (CV) to the toolkit for its latest vintage.

Stonecutter III, which closed on USD 195m less than three months ago, has already completed 10 deals, according to Michael Joseph, co-CEO and managing partner of Ion Pacific. Two of these are CVs.

In one, Ion Pacific backed a EUR 30m multi-asset CV for European early-stage VC SpeedInvest. It is part of a SpeedInvest’s “proactive” distributions to paid-in (DPI) strategy intended to provide liquidity to its LPs “while maintaining exposure to a select group of high-performing portfolio companies.” The other involves an unnamed US-based venture capital firm.

Ion Pacific is exploring other single-asset and multi-asset CVs with SpeedInvest, while the firm’s broader deal pipeline includes more than five CVs across the US, Europe, and Asia, Joseph said, adding that the scale of the opportunity set reflects industry-wide liquidity challenges.

“The amount of primary capital raised for VC funds has gone up massively when you look at vintages of 2016 to 2019 and beyond. It was about 3x, even 4x, of what was raised a decade earlier,” he explained.

“A ton more capital went into the system, creating a ton of unicorns, so the queue for IPOs got much longer. Many funds are sitting on multiple unicorns, but they can’t all IPO at once because the market can’t handle it. But they are at year 10, so what do they do?”

In many cases, these are solid, revenue-generating traditional technology businesses – in areas like software-as-a-service (SaaS) and fintech – that have seen their valuations dampened amid the excitement around artificial intelligence (AI). Now, with valuations falling, exits seem far away.

Wider acceptance

The preferred equity transactions Ion Pacific has pursued historically involve transferring economic interests in funds and portfolio companies without moving assets into new vehicles. It’s a solution that enables investors to generate liquidity without necessarily harming legal and personal ties to founders.

As secondaries become more widely accepted, these sensitivities fade. Global secondaries volume reached a record USD 222bn in 2025, according to UBS. Of the USD 104bn in GP-led activity – which is dominated by CVs – the venture capital and growth-stage portion was USD 12bn, up 40% year-on-year.

CVs weren’t a feature of Ion Pacific’s second fund, which closed on USD 135m in 2022, because such opportunities were few at the time, Joseph noted. Fund III is expected to feature a good mix of direct and structured investments in companies as well as single and multi-asset CVs.

The underwriting process for CVs is little different to what the firm has always done. However, Ion Pacific believes there aren’t many secondaries investors chasing CVs that have the necessary experience and appetite for venture capital.

In line with prevailing VC trends, mobility and physical AI increasingly feature in portfolios alongside the mainstays of enterprise software and fintech. Ion Pacific recruited Rom Weissman, previously a data science specialist at Google and US start-up Simply, earlier this year as CTO to lead AI implementation.

Approximately 60% of Fund III is set to be invested in the US, with the balance split between developed Europe and Southeast Asia. The 10 investments completed to date amount to 50% of the overall corpus. Deployment has been “very fast compared to previous funds,” Joseph observed, adding that Ion Pacific could be back in the market with Fund IV within 12 months.

The firm is currently working on 40 active transactions, compared to 15 at the same stage in the previous fund. Geopolitical instability, accentuated by conflict in the Middle East, is seen as a near-term driver of deal flow as investors prioritise liquidity.

“Whenever there is uncertainty in the market, investors tend to focus on risk reduction across illiquid assets,” Joseph said. “Most GPs are actively talking to secondary players, so we are having more conversations than ever before. Transactions last year were the highest that they’ve ever been. This year will be even higher.”

Institutional angle

While Stonecutter III is being deployed rapidly, the fundraising process took longer than expected. Joseph put this down to Ion Pacific adding more institutional investors to its traditional roster of family office and high net worth individual supporters. Approximately half the capital comes from institutions, including Qatar Investment Agency (QIA).

Lead times for securing commitments from institutional investors tend to be longer, with site visits and meetings across different global offices, he noted. However, a more institutional LP base is desirable for its stability and the flexibility it permits in terms of deal size. Nine of the 10 deals completed so far have required co-investment.

“In retrospect, Fund III should have been bigger. We undersized the market; we shouldn’t have to go to co-investors for every deal,” Joseph said. “The next fund will almost certainly be a significant step up.”

By Ketaki Gokhale