Key take away points of the article in the NYT on Rot in Private Equity’ as Funds Strike Circular Deals

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Key Take away points

The article argues that the growing use of continuation funds in private equity is a warning sign of deeper structural problems in the industry. As high interest rates and weak deal markets make it difficult to sell portfolio companies to outside buyers, private equity firms are increasingly selling companies to themselves, moving assets from older funds into new, manager-controlled continuation vehicles.

These transactions allow firms to book paper gains, return some cash to investors, and defer real exits, but critics say they mask poor performance, inflate valuations, and create serious conflicts of interest. Investors are becoming more alarmed as several high-profile continuation-fund deals—such as Clearlake Capital’s Wheel Pros investment and Platinum Equity’s United Site Services—have ended in bankruptcy, wiping out investors entirely.

Large pension funds and sovereign wealth funds warn that continuation vehicles undermine private equity’s core purpose of creating value through genuine buying and selling, instead turning into a system of circular deals, fee extraction, and delayed losses. While the industry insists the deals are independently vetted, investors and regulators increasingly question transparency, valuation discipline, and whether returns are real or merely accounting artifacts.