Private Equity Figured Out How to Stop Selling. Retail Money Is Now Helping Fund It.

A decade ago, a buyout firm selling one of its companies to itself would have drawn hard questions from its own investors. Today that maneuver is the single largest category of activity in the fastest growing corner of private markets. The vehicle is called a continuation fund, and the mechanics are almost mundane once you strip away the jargon. A private equity firm owns a business it does not want to let go of. The fund holding that business is aging, and its investors want cash back. So rather than sell the company to a rival or take it public, the firm moves the asset into a new fund that it also manages, financed by a different set of investors. Same sponsor, same company, fresh capital, fresh clock. What changed this year is not the structure. It is the price the sponsor charges for running it.

A Record Half Built on Deals That Are Not Really Exits

The numbers from the first half of 2026 are striking. According to data from Evercore, the most active broker in this market, reported by PitchBook in July, total secondary market volume surpassed $120 billion in the first six months of the year. That is roughly a 20 percent jump over the first half of 2025, which itself was the previous record. Transactions led by general partners, meaning deals the fund manager initiates rather than deals where an investor quietly sells a stake, accounted for nearly 54 percent of that volume. Continuation funds made up about 86 percent of the general partner led total. Deals centered on a single company, the trophy asset a sponsor cannot bring itself to part with, came to roughly $34 billion on their own.

That is a genuine reversal. For years, investor led sales dominated the secondary market as pensions and endowments trimmed overweight private equity positions. Now the sponsors are driving the bus. The reason is not mysterious. Initial public offerings and corporate acquisitions have not cleared the backlog of companies sitting in funds well past their expected life, and limited partners have been vocal about wanting distributions. A continuation fund solves the immediate problem elegantly. Investors who want out get paid. Investors who want to stay can roll. The sponsor keeps managing an asset it believes still has room to run.

Elegant is not the same as free, though. And this year the cost changed in a way most individual investors will never see in a marketing deck.

Super Carry Shows Up Without Much of an Announcement

Here is the finding that deserves more attention than it has received. By dollar volume, roughly 35 percent of continuation funds that closed in the first six months of 2026 had premium economics written into their fund documents, according to Evercore’s survey reported by PitchBook. In the bank’s full year 2025 survey, that figure was about 15 percent. More than doubled, in six months.

The industry calls this super carry. There is no universal definition, but Evercore describes it as terms that let a manager claim more than 20 percent of the profit a deal generates. Twenty percent has been the working standard in private equity for decades. Now, in a growing share of these deals, it is a floor rather than a ceiling. A 2025 study by the law firm Morgan Lewis found the highest carry level observed was 30 percent, and that about three quarters of continuation funds used tiered structures, where the manager’s profit share steps up as returns cross defined thresholds. A fund might pay 20 percent at a doubling of capital and 30 percent at a tripling.

Is that automatically bad? Not necessarily, and the case in favor is worth hearing. Supporters argue that shifting more of a manager’s compensation onto performance, and away from a management fee that gets paid whether or not anything works, sharpens focus. Bain Capital has built this logic into its funds broadly, offering two classes of investor interest where the second carries a 30 percent profit share for the manager alongside a lower management fee. Evercore also notes that richer performance terms are simply a way to win a competitive auction, which is an honest description of what happens in a market this hot.

There is a real signaling argument too. Nick Lawler, managing director and head of secondaries at Churchill Asset Management, told PitchBook that moving an asset into a continuation fund on softer economics than the original vehicle “could actually be a negative signal regarding the sponsor’s conviction in the go-forward outlook.” He added that determining a fair price for the asset, and making sure the sponsor has real money at risk, matter more than the argument over carried interest.

The skeptics are just as pointed. One managing partner at a secondaries firm specializing in these deals told PitchBook that if a manager can make more money by moving an asset into a continuation vehicle than by leaving it where it is, that “creates misalignment from the outset.” Others worry that buyers are giving with one hand and taking with the other, sweetening the performance terms while shading down the price paid, which hurts precisely the investors trying to exit. Steven Hartt, a managing principal at consultant Meketa Investment Group, put it about as bluntly as anyone does on the record. “For an investor in the original fund, continuation funds are not a way to generate the highest value for the asset,” he said. “I wish they would just sell the investment.”

Why This Now Lands in Ordinary Portfolios

For most of this market’s history, none of this would have mattered to a self-directed investor. Continuation funds were an institutional argument among pensions, endowments and their consultants. That has changed fast.

A Jefferies report published in January and covered by Bloomberg found that private investment funds designed for individuals have become the fastest growing source of capital in what was a roughly $240 billion secondaries market in 2025, up about 48 percent from 2024. Secondaries made up about 40 percent of the $113 billion raised for evergreen funds, the semi-liquid vehicles built for retail and smaller institutional buyers that allow periodic redemptions. Jefferies found the fair market value of secondaries held in retail oriented funds has nearly tripled since 2023, and that seven of the ten largest secondaries buyers now invest out of evergreen vehicles alongside their traditional closed-end funds. Scott Beckelman, global co-head of secondary advisory at Jefferies, said that “even a modest allocation shift in retail could amount to trillions of incremental capital.”

He also noted that retail strategies, which started out buying diversified portfolios of fund stakes, are increasingly backing continuation funds directly. So the chain runs like this. An individual buys an evergreen private equity fund through a brokerage platform or an advisor. That fund puts a meaningful slice of its capital into secondaries. A growing share of those are continuation funds. And a growing share of those now carry fee terms above the old industry standard, layered underneath whatever the evergreen fund itself charges.

The timing matters because the regulatory door is moving the same way. The Department of Labor proposed a rule on March 30 of this year establishing process based safe harbors for 401(k) fiduciaries evaluating alternative assets, with a comment period that closed June 1. The proposal explicitly asks fiduciaries to weigh performance, fees, liquidity, valuation, benchmarks and complexity. Separately, the Supreme Court agreed in January to hear Anderson v. Intel Corporation Investment Policy Committee, the leading case on whether plan sponsors face liability for offering nontraditional options.

What Is Actually Worth Reading

None of this makes continuation funds inherently bad investments, and plenty involve strong businesses a sponsor knows better than any outside buyer would. The point is narrower. Fee terms in this market are moving, they are moving in the manager’s favor, and the disclosure reaching individual investors sits several layers away from where the change is happening.

If you are looking at an evergreen or interval fund with private equity exposure, the prospectus will tell you the fund’s own management fee and any incentive fee. What it will rarely tell you is what the underlying deals cost. Worth asking: how much of the portfolio sits in general partner led secondaries, what economics the fund accepts in those deals, and how the manager values assets that have no market price between reporting dates. Evercore noted one more signal buried in the data. Continuation funds involving software companies fell as a share of general partner led volume, partly on concerns about artificial intelligence disrupting those businesses. Even in a record market, buyers are sorting.

The secondary market has become the release valve for a private equity industry that cannot exit fast enough. That is a legitimate function. Just know that valves have a price, the price went up this year, and a growing share of the money flowing through them belongs to people who have never sat in a limited partner advisory committee meeting.

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This article is written for educational and informational purposes only and does not constitute financial or legal advice. The views and analytical frameworks presented draw on publicly available information and reported commentary from industry participants. Readers are encouraged to consult primary sources and form their own informed views on these complex topics.