Private equity firms sell assets to themselves at a record rate in 2025

Private equity firms have increasingly used continuation vehicles to buy assets from their older funds, accounting for roughly a fifth of PE sales in 2025 (up from 12–13% in 2024), with Sinha Haldea forecasting about $107bn of such sales this year versus $70bn in 2024. Firms including PAI (which sold part of Froneri at a £13bn valuation), Vista, New Mountain and Inflexion have pursued these deals to cope with weak exit valuations, preserve upside and capture additional fees, while some institutional backers warn of conflicts of interest and the risk that assets may be underpriced in transfers to new, manager-led funds.

Analysis

Market structure: Large, integrated PE managers (Blackstone, KKR, Apollo, Brookfield-style platforms) are immediate winners — they capture incremental management and carried-fee streams and recycle assets into continuation vehicles, potentially adding ~%points to GPM over 12–24 months. Losers are LPs in aging funds, public-market sellers and boutiques that rely on open-market exits; expect a material reduction in high-quality deal supply to M&A and IPO channels, pressuring transaction volumes by an estimated 15–30% versus a normal year.

Risk assessment: Key tail risks are regulatory intervention (SEC/ESMA guidance or fiduciary rule changes within 3–12 months) and high-profile LP litigation that forces markdowns or blocks continuation deals, which could trigger a rapid ~10–30% re-rating of listed PE managers. Hidden dependencies include availability of private-credit financing and secondary-market appetite — if debt markets tighten (spread widening >200bp) continuation financing becomes uneconomic and managers may be forced to sell into weak markets.

Trade implications: Favor listed PE and private-credit franchises that monetize continuation activity (BX, KKR, APO, ARES, BAM) over the next 6–12 months; be cautious on small-cap/IPO-linked equities and M&A-dependent boutiques. Use relative-value pairings (manager longs vs Russell 2000 short) and volatility-selling on names with predictable fee streams; size positions to 1–3% of portfolio and hedge regulatory-event risk.

Contrarian angle: Consensus frames continuation funds as governance failures; underappreciated is that ~20% of 2025 sales are recycling liquidity — implying durable fee revenue even if exit markets stay soft. If regulators limit continuation structuring, forced sales could create a buying window for strategic acquirers and secondaries buyers: prepare dry powder allocation of 2–4% to deploy on 10–20% discounted private assets over 3–9 months.

Key Decisions for Investors

• Establish a 2.5% net long allocation split equally among Blackstone (BX), KKR (KKR) and Apollo (APO) with a 6–12 month horizon to capture fee/recurring-revenue tailwinds; finance by selling 1–3 month OTM calls (10–15% OTM) to reduce cost. Reduce to zero or hedge if regulator issues formal guidance limiting continuation deals within 90 days or any firm reports >15% share-price drawdown on governance litigation.
• Allocate 1.5% long to Ares (ARES) and 1% to Brookfield (BAM) to play private-credit and real-asset financing demand for continuation vehicles; trim if leveraged loan spreads widen >200bp or CLO issuance falls >30% quarter-over-quarter.
• Implement a 2% pair trade: long 2% BX exposure vs short 1.5% IWM (iShares Russell 2000) to express manager fee capture vs small-cap exit-cycle risk; rebalance quarterly and cover the short leg if Russell outperforms BX by >8% in any 3-month window.
• Prepare a 2–4% opportunistic cash reserve to deploy into secondaries/private assets if regulatory clampdowns or forced sales create 10–20% discounts within 3–9 months; trigger deploy when announced LP litigation or regulator action causes target PE manager share moves >20% intraday.