The U.S. Securities and Exchange Commission's enforcement division has opened an investigation into private equity continuation vehicles, a rapidly expanding fund structure that allows asset managers to extend their hold on portfolio companies beyond a traditional fund's lifespan, according to people familiar with the matter.
Continuation vehicles, or CVs, are structures in which a fund manager transfers assets from a maturing fund into a new vehicle, offering existing investors the option to redeem their stakes while bringing in new capital. The probe, first reported by Reuters, centers on potential conflicts of interest, how managers value assets, and whether investor disclosures are adequate and consistent.
The scrutiny arrives as activity in the space accelerates. Fund manager-led secondary transactions, of which CVs represent the majority, totaled $106 billion in 2025, up from $70 billion in 2024, according to investment bank Evercore. Separately, capital raised by global private equity continuation funds reached $62.67 billion in 2025, the highest annual total since at least 2017, per a May note from S&P Global Market Intelligence citing Preqin Pro data.
Drivers of the CV Boom
Traditional private equity funds typically operate on a ten-year cycle, but elevated interest rates, geopolitical disruption, and policy uncertainty have made profitable exits more difficult. According to June 2026 data from Bain & Co, private equity firms hold a backlog of more than 30,000 unsold portfolio companies. Rolling assets into a CV allows managers to delay a sale, return some capital to original backers, and reset the clock without taking a loss.
Credit assets are also gaining traction in the structure. Evercore reports that credit made up 11% of fund manager-led secondary transactions in 2025, up from 5% in 2024. Research from consulting firm Mercer, drawing on approximately 150 transactions between 2021 and 2025, found that pricing in GP-led deals has been more disciplined than critics suggest. Around 59% of transactions closed at a discount to net asset value, 40% at par, and just 1% at a premium, with an average settlement discount of approximately 8%. Management fees across the sample averaged 0.85%, and tiered carry arrangements with a 20% maximum carry level dominated.
Structural Conflicts of Interest
The conflict-of-interest issue is inherent to the structure. In a CV transaction, the investment manager is simultaneously the seller on behalf of existing fund investors and the buyer on behalf of incoming investors—a dual role in an asset class where pricing is illiquid and hard to verify independently.
“GP-led secondaries can play a useful role in private markets portfolios, particularly for investors seeking exposure to high-quality assets, shorter duration profiles or targeted access to high-conviction companies,” Benjamin Baumann, Mercer's global head of secondaries, said in a June note. “However, continuation vehicles must be assessed holistically, on total deal economics, total portfolio risk and asset and manager quality.”
Mercer's research also flagged deferred consideration—provisions included in approximately 15% of reviewed deals that delayed part of the purchase price—as a commonly misunderstood feature that can flatter reported returns while shifting economic risk in ways headline figures may not capture. The report notes that while average general partner commitment to continuation vehicles ranged from 6% to 10%—higher than in primary fund structures—it is also worth asking whether managers are rolling their active equity or cashing out.
SEC Broadens Private Market Sweep
The enforcement probe into CVs is part of a wider escalation of SEC attention on private markets. Since late 2025, enforcement staff have been working to build an informal cross-division working group with the SEC's examinations and investment management divisions, aimed at closer information-sharing on the opaque private credit sector, Reuters reported. At an industry event in May, SEC Chairman Paul Atkins confirmed the agency is investigating allegations of misconduct among private credit firms. David Woodcock, the SEC's enforcement director, said at the same event that the agency is “attuned to potential risks relating to liquidity, fees, valuations, and conflicts of interest” across the sector.
Scrutiny of private markets has intensified since late last year, when redemption issues at Blue Owl Capital and problems at BlackRock funds raised fresh concerns about risk transmission in private credit. The global private credit market is broadly sized at least $1.8 trillion, according to multiple industry estimates. For advisors, the developments underscore the need to evaluate CV investments carefully, particularly as advisor demand for alternatives shifts and private markets hit $18 trillion, prompting calls for regulatory overhaul.
