Wall Street’s Hottest Summer Trend: ’Private for Longer’ Takes Center Stage

Wall Street's playing a new game—and it's all about staying out of the public eye. Forget rushing to IPO; the smart money's doubling down on private rounds, bigger valuations, and later-stage funding that keeps companies off the retail radar until they're absolute giants.

Why go public when you can raise $500M in a Series G?

VCs and PE firms are driving up pre-IPO valuations, creating a two-tier market where public investors get the leftovers—once all the real growth's already been captured. It's the ultimate insider move, dressed up as 'patient capital.'

And here’s the twist: while traditional finance plays hide-and-seek with liquidity, crypto’s flipping the script with real-time price discovery and permissionless entry. Maybe Wall Street's just scared of a little transparency.

Stay private, stay exclusive—or just admit you're afraid of a fair fight.

How it all works

Traditional private equity funds raise money from large institutional investors in order to buy out companies. The next step is to improve margins so that they can eventually take these companies public or sell them and return profits to their investors.

That model has faced difficulty in recent years, with the struggle for exits coming down to a combination of valuation discrepancies between buyers and sellers amid higher interest rates, which has tapered growth in the IPO and M&A markets and led to a growing backlog of unsold assets.

The slower exits have also contributed to a tougher year for the stocks of Wall Street's biggest private market megafund managers. That includes Blackstone (BX), Kohlberg Kravis Roberts & Co. (KKR), Apollo Global Management (APO) and Blue Owl (OWL). (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

Blackstone and KKR are down 3% and 6%, respectively, while the stocks of Apollo and Blue Owl have fallen roughly 17% and 19% over the same period.

There is a gap between the inventory of active private sponsored companies operating globally and the amount of opportunities currently available in the deals market, according to Andrew DiGeronimo, co-head of partnership solutions for major private markets player Warburg Pincus.

“I think you'll see record year after record year over the next several years in this business just simply because of a structural imbalance,” said DiGeronimo.

In short, fund managers have more assets to sell than there is demand from buyers. That poses an obstacle for delivering investors the cash profits they planned for.

A fund's life

A typical buyout fund has a lifespan of 10 years, while a little over half of all active private equity funds globally (55%) are between six and nine years old, according to a June report from PitchBook.

The wider controversy surrounding continuation vehicles revolves around conflict of interest questions from investors, given how the fund manager or financial sponsor selling the asset is often also the buyer. Within overall fund manager or general partner-led secondary transactions (87% use continuation vehicles), just 17% of limited partners rolled their investment over into these new funds over the first half of this year, according to Jefferies.

Critics also worry about fund managers using these rollovers as an opportunity to charge investors with new fees on old assets.

Still, there has been some effort to establish parameters around continuation vehicles. The Institutional Limited Partners Association, a trade group, issued guidance on the practice in 2023, calling for more deal transparency in addition to hiring outside parties to review conflicts of interest and ensure a reasonable sales process.

In some cases, big funds are now using the maneuver as a way to hold on to their biggest assets. For example, New Mountain Capital formed a $3.1 billion continuation vehicle in April to roll portfolio healthcare company Real Chemistry into its own single-asset fund.

"This growth is not merely cyclical but reflects a fundamental shift in how private equity liquidity is managed, and even the most resistant investors are now seeking exposure to the asset class," according to Jefferies.

Warburg's DiGeronimo sums it up even more succinctly as "the trend of private for longer."

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.