Private Equity Firms Sell Assets to Themselves

Private equity firms are increasingly utilizing continuation vehicles to sell assets to themselves, a trend that is set to account for a fifth of all sales by the sector in 2025. This practice involves transferring assets from one fund to another vehicle managed by the same firm, often to hold onto high-performing companies longer or to provide liquidity to investors in older funds.

The rise of these internal deals marks a significant shift in the industry's exit strategies, moving away from traditional sales to third-party buyers or public listings. While proponents argue this offers flexibility and maximizes value, the trend raises questions about valuation standards and potential conflicts of interest. The record rate of these transactions highlights the evolving landscape of private equity and the challenges of exiting investments in a competitive market.

The private equity landscape is witnessing a notable shift in how firms manage their portfolios. Continuation vehicles have emerged as a dominant strategy, allowing firms to effectively sell assets from one fund to another fund they also manage. This mechanism is projected to account for 20% of all sales by the sector in 2025, representing a record rate of internal transfers.

This trend is driven by several factors. Firms are often reluctant to sell promising assets at the end of a fund's life, especially if the company has not yet reached its full potential. By using a continuation vehicle, the firm can:

• Retain control of high-growth assets
• Provide an exit for investors in the original fund
• Secure additional capital for future growth

This strategy effectively extends the holding period of the asset under the same management umbrella.

The increasing prevalence of these self-sales has significant implications for the broader financial market. Traditionally, private equity exits involved selling companies to strategic buyers, other financial sponsors, or through initial public offerings (IPOs). The shift toward continuation vehicles reduces the supply of companies available for traditional acquisition, potentially altering market dynamics.

Furthermore, this trend highlights the industry's search for liquidity solutions. As the volume of dry powder (unspent capital) grows, firms need efficient ways to cycle capital. These internal transactions offer a structured path to:

1. Distribute capital to limited partners (LPs) in older funds
2. Reinvest in the asset with a new mandate
3. Align incentives for fund managers

However, the lack of an external market valuation can sometimes complicate the assessment of true asset value.

As the volume of these deals grows, scrutiny from regulators is expected to intensify. The SEC (Securities and Exchange Commission) and other global bodies like the UN (United Nations) often monitor trends that could impact market integrity. The primary concern revolves around conflicts of interest, as the selling fund and the buying vehicle share the same management.

Key questions being raised include:

• Are valuations truly independent?
• Do these deals serve the best interests of all investors?
• How transparent is the pricing process?

While these transactions are legal and often structured to benefit investors seeking liquidity, the optics of a firm buying its own assets require rigorous governance. The industry must balance the need for flexibility with the obligation to maintain fair and transparent markets.

Looking ahead, the use of continuation vehicles is likely to remain a staple in the private equity toolkit. The record rate seen in 2025 suggests that this is not a temporary fad but a structural change in how capital is managed. Firms that can master the complexity of these transactions will likely have a competitive advantage in retaining top-tier assets and satisfying investor demands.

Ultimately, the success of this strategy will depend on the ability to generate returns that justify the internal transfer. If these vehicles consistently outperform traditional exit methods, the industry may see a permanent reduction in third-party sales. However, if valuation discrepancies or conflicts arise, regulatory intervention could reshape the landscape once again.