Exclusive-US SEC probes popular type of private equity fund as it steps up industry scrutiny, sources say By Chris Prentice, Dawn Kopecki and Isla Binnie WASHINGTON, June 24 The U.S.
Securities and Exchange Commission’s enforcement division is probing funds typically used by private equity firms and other money managers to hold on to assets they either cannot or do not wish to sell, as the agency explores potential issues in private markets, said three people familiar with the matter
In recent months, SEC enforcement staff have homed in on a number of “continuation vehicles,” or CVs, said the people, who spoke on condition of anonymity. They are investigating potential conflicts of interest around the CVs, how managers are valuing the assets, and whether investor disclosures are sufficient and consistent, the three people said. Reuters could not ascertain which specific funds are being investigated or what type of assets they hold.
The enforcement scrutiny into CVs has not previously been reported. Continuation vehicles have surged in popularity, with fund manager-led secondary transactions worth $106 billion last year, according to Evercore. Rising interest rates have made it harder for PE firms to find buyers willing to match the lofty multiples paid for some companies, especially during the pandemic when rates were low and money was cheap.