If you have money in a pension fund, a state retirement system, or a university endowment, your savings may be tangled in one of Wall Street’s most contentious practices.
The Securities and Exchange Commission’s enforcement division has opened a probe into private equity continuation vehicles, which made up the majority of $106 billion in fund manager-led secondary deals last year, Reuters reported, citing three people familiar with the matter.
How continuation vehicles let fund managers trade with themselves
Traditional private equity funds operate on a roughly ten-year cycle, during which a firm buys companies, grows them, and sells them at a profit to return cash to investors.
Continuation vehicles upend that model by allowing managers to transfer assets from a maturing fund into a new vehicle, bringing in fresh investors while giving existing backers the choice to cash out or stay in.
The structural problem is that the fund manager is on both sides of the transaction, acting as seller for original investors and buyer for incoming ones, in assets where pricing is opaque and hard to verify independently.
That dual role creates incentives to inflate valuations, and it raises questions about whether buyers and sellers are receiving the same information, critics have warned.
Manager-led secondary transactions, of which continuation vehicles make up the majority, totaled $106 billion in 2025, up from $70 billion the prior year, Evercore estimated.
Major investors call continuation vehicles ‘indicative of rot’
Some of the country’s largest institutional investors have voiced sharp objections to the growing use of these structures, calling them a symptom of dysfunction in the private equity industry.
“Continuation vehicles are indicative of rot in private equity,” Marcus Frampton, chief investment officer of the Alaska Permanent Fund Corporation, which manages $83 billion derived from the state’s oil revenues, told The New York Times.
Fund manager buys and sells:
- Warren Buffett’s Berkshire triples stake in newspaper giant
- Cathie Wood sells $16M of surging semiconductor stock
- Bill Ackman discloses new $2.09 billion stake in megacap tech stock
The increased reliance on continuation vehicles was a key reason the Alaska fund reduced its private equity allocation from 22% in 2021 to approximately 17%, Frampton said, arguing that firms were abandoning their core purpose of creating value.
Scott Ramsower, who oversees private equity investments for the Teacher Retirement System of Texas, a pension fund managing roughly $229 billion, said the pension would prefer that private equity firms avoid continuation vehicles entirely, citing inherent conflicts when a firm sits on both sides of a deal, The New York Times reported.
Jacob Wackerhausen/Getty Images
Billion-dollar losses expose continuation fund dangers
Those warnings have materialized in several high-profile losses that illustrate the real-world consequences of the continuation vehicle structure.
Fortress Investment Group, Ares Management, and Blackstone collectively face a combined $1.4 billion loss in a continuation fund created by Platinum Equity in 2021 to acquire United Site Services, Bloomberg reported.
Clearlake Capital held Wheel Pros, an auto accessories company, in a continuation fund when the business declared bankruptcy, wiping out every investor in the vehicle.
Those investors included public employees’ pension funds from New York, Connecticut, and Nevada, though Connecticut and Nevada had previously sold out of some of their stake, The New York Times reported.
SEC builds cross-division effort to police private markets
The continuation vehicle probe is part of a broader escalation of SEC scrutiny over private markets, including the roughly $1.8 trillion global private credit sector, which expanded rapidly after post-2008 banking rules limited mid-market lending.
Enforcement staff have been building an informal working group with the SEC’s examinations, investment management, and other divisions since late 2025 to coordinate oversight of the opaque sector, the sources told Reuters.
JPMorgan Chase CEO Jamie Dimon warned at an April 28 Norges Bank investment conference that the next credit downturn will be ‘worse than people think,’ CNBC reported.
Some firms may be brilliant, but I guarantee you not all 1,000 of them are…So in my view, because of that and the underwriting standards, we haven’t had a credit recession in so long, so when we have one, it will be worse than people think. It won’t be terrible; it’ll just be worse than people think in private credit
SEC Chairman Paul Atkins confirmed in May that the agency is investigating fraud allegations among private credit firms, Bloomberg reported.
Enforcement director David Woodcock said in remarks at the MFA Legal & Compliance Conference in May 2026 that the agency is closely tracking risks tied to liquidity, fees, valuations, and conflicts of interest across the sector.
Private equity’s exit backlog puts pressure on your pension
Private equity firms are sitting on a backlog of roughly 33,000 unsold portfolio companies, according to June 2026 data from Bain & Co.
Rolling those assets into continuation vehicles allows firms to return some capital to backers without selling at steep discounts.
When firms cannot sell companies profitably, they cannot return cash to the pension funds and endowments that invested with them, which constrains those institutions’ ability to fund obligations to retirees and beneficiaries.
Robert Morris, founder of private equity firm Olympus Partners, wrote in a firm blog post that allowing 401(k) plans to invest in private markets ‘bodes to be the successor to the 2008 mortgage crisis,’ warning that retail investors would assume ‘ample dollops of additional risk’ for returns unlikely to exceed an equity index fund.
The SEC’s probe does not constitute evidence of wrongdoing, and fund managers note they typically obtain third-party fairness opinions for these transactions, Reuters reported.
But for millions of Americans whose retirement savings flow through private equity, the investigation’s outcome could shape whether meaningful new oversight emerges.
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