New ‘Self-Rescue’ Trend: Private Funds Use Continuation Funds to Cash Out

When traditional exit channels are blocked, the private equity industry is seeking new "self-rescue" methods.

Recently, the sector has increasingly adopted a controversial strategy to cash out for clients—selling assets to other funds they manage. With few external buyers and IPOs stalled, this "self-dealing" through continuation funds has become a new norm.  

In the first half of 2025, this practice, known as continuation funds, hit a record high.

Jefferies’ report shows private equity funds exited $41 billion via continuation funds, a historical peak, accounting for 19% of total sales, up 60% from last year.

Analysts note this reflects industry struggles: a sluggish IPO market, weak M&A activity, and cash returns at half the traditional level for four years, with over $3 trillion in unsold assets.  

Jefferies’ Todd Miller said: “We’re in the third or fourth year of low distributions, with a challenging exit environment and dormant IPO market.”  

Leading firms like Vista Equity Partners, New Mountain Capital, and Inflexion have jumped into continuation funds. Vista raised a record $5.6 billion fund, selling Cloud Software Group equity to a new fund, while Inflexion’s £2.3 billion deal included Aspen Pumps and Rosemont Pharmaceuticals.  

Secondary market trades surged, exceeding $100 billion in H1 2025, up 50% year-over-year, with over half from limited partners selling stakes.

Jefferies’ Scott Beckelman noted: “This is now a core exit channel, with most sponsors planning one to two such deals per fund.”  

Yet, concerns arise as some see it as capital recycling. Bain & Co’s report shows two-thirds of investors prefer traditional sales or IPOs, while only one-sixth favor continuation funds.