New investors as "the ones left holding the bag," continuing to earn "management fees"—the "Ponzi game" of American private equity giants

According to ZeroHedge, in the most blatant display of industry self-interest since the last round of crisis, American private equity giants are selling assets to themselves at a record pace. To support their faltering empires, these firms are resorting to a strategy criticized by outsiders as desperate and bearing characteristics of a Ponzi scheme: not only making new investors the “suckers,” but also using this to indefinitely lock in management fee income. Data from Raymond James shows that such transactions—where private equity firms raise capital from new investors to purchase their own old fund portfolios—are expected to reach an astonishing $107 billion in 2025, far exceeding last year’s $70 billion. These tools, known as “continuation vehicles,” allow private equity giants to return funds to limited partners in old funds who need liquidity, while retaining control of the assets. More importantly, this resets the clock for management fees and carried interest. This operating model has sparked strong concerns about conflicts of interest in the market. In these deals, the private equity firm plays both buyer and seller, essentially controlling the pricing as assets move from one “pocket” to another. Limited partners, such as pension funds, worry that managers may deliberately depress valuations to harm exiting investors, paving the way for outsized returns for the new fund. Although institutions like Jefferies predict global transaction volume in this area will approach $100 billion, and insiders paint it as a “win-win liquidity solution,” surveys by Bain & Company show that nearly two-thirds of limited partners still prefer traditional exits—such as sales to external buyers or IPOs. As this “circular money game” becomes the new norm, the market questions whether it is merely a way of prolonging the private equity bubble until the music finally stops. ## Continuation Fund Surge: Internally Passed “Hot Potato” Amid a still frozen real market exit environment, private equity firms are turning to “continuation funds” as their tool of choice. According to the Financial Times, around one-fifth of private equity exit cases this year involve such transactions, a significant jump from the previous average of 12-13%. Sunaina Sinha Haldea of Raymond James predicts that deal volumes will surpass $100 billion in 2025. The core of this mechanism is that when large private equity firms cannot find outside buyers, they set up new funds and internally pass on the “hot potato.” Sunaina Sinha Haldea calls it a “popular and effective multi-win liquidity solution” in the current environment. However, **critics point out this is actually the ultimate “have-it-both-ways” scam: redeeming old capital, locking in new capital, and indefinitely extracting management fees from the same assets.** ## Giants Enter the Arena: From Last Resort to First Choice Tool The Financial Times notes that the list of firms engaging in such transactions reads like a “who’s who” of private equity. PAI Partners recycled part of its holding in ice cream giant Froneri (associated with Häagen-Dazs) into a continuation fund, with a deal valuation of 15 billion euros. Additionally, Vista Equity, New Mountain Capital, and Inflexion have each deployed billions of dollars in continuation funds, keeping core assets rather than putting them on the open market or seeking real third-party buyers. Even Per Franzén, CEO of EQT who hadn’t entered this area before, recently admitted an intention to join in, **with the motive obvious—generating additional fees on existing positions. What was once seen as the “last lifeline” for assets nobody wanted, has now mutated into the favored tool for hoarding high-quality assets.** ## Conflicts of Interest and Legal Risks: Pricing Power in Their Own Hands This self-dealing model hides enormous conflicts of interest. Because private equity firms sit on both sides of the deal table, they determine the price for assets to be transferred. This has led institutions like the Abu Dhabi Investment Authority to initiate lawsuits. The Abu Dhabi Investment Authority sued US firm Energy & Minerals Group (EMG), accusing it of trying to undervalue natural gas driller Ascent Resources in a self-sale. The lawsuit claims EMG attempted to depress the price to increase its own ownership and restart fee collection. The deal ultimately broke down due to the lawsuit, and now outside bidders are stepping in. Such cases highlight the anger of limited partners: they fear managers could use valuation manipulation to “harvest” exiting investors, while laying the foundation for new funds’ returns. Risk Warning and Disclaimer The market has risks, and investment should be made cautiously. This article does not constitute personal investment advice and does not take into account an individual user’s specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. Investing based on this article is your own responsibility.