The U.S. Securities and Exchange Commission's enforcement division is actively investigating private equity continuation vehicles, a fast-growing fund structure that allows asset managers to extend their hold on investments beyond a fund's typical lifespan, according to inside sources.
Continuation vehicles – or CVs – are investment structures in which a fund manager transfers assets from a maturing fund into a new vehicle, giving existing investors the option to cash out while bringing in fresh capital.
The probe, reported by Reuters, centers on potential conflicts of interest, how managers are valuing assets, and whether investor disclosures are adequate and consistent.
The SEC scrutiny, disclosed anonymously to Reuters by people familiar with the matter, lands at a moment of surging activity in the space. 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, according to a May note by S&P Global Market Intelligence citing Preqin Pro data.
Traditional private equity funds operate on roughly a ten-year cycle, but elevated interest rates, geopolitical disruption, and policy uncertainty have made profitable exits harder to execute.
Going by June 2026 data from management consultancy Bain & Co, private equity firms are currently sitting on 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 a foothold in the structure. According to Evercore, 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 the data.
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 the 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 Mercer report notes that while average general partner commitment to continuation vehicles ranged from 6% to 10% – higher than in primary fund structures – it's also worth asking whether managers are rolling their active equity or cashing out of their positions.
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 what sources describe as 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 in the neighborhood of at least $1.8 trillion, according to multiple industry estimates.
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