$100B Continuation Funds, 53% Semi-Liquid Capital — PE Adapts

Good morning, ! This week we're diving into valuation discipline under regulatory pressure, healthcare PE’s $190B comeback, the shift toward semi-liquid capital as exits stall, inflation risks hiding behind softer prints, and why continuation funds are moving from workaround to necessity.

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DATA DIVE

Healthcare PE Reclaims Its Crown

After a two-year recalibration, healthcare private equity came roaring back in 2025. Disclosed deal value topped $190 billion, eclipsing the 2021 peak, while exit value surged to $156 billion, nearly 3x 2024 levels. This wasn’t a volume-for-volume’s-sake rally—it was a quality reset.

Capital concentrated around scaled platforms, with more than 40 healthcare deals exceeding $1 billion, and sponsor-to-sponsor exits doing the heavy lifting. Biopharma anchored value, provider services led by deal count, and medtech quietly gained share.

But returns told the real story. Healthcare IT continued to outperform, posting a 2.3x median MOIC and ~26% IRR, driven by recurring revenue, low capital intensity, and operational leverage.

Bottom line: capital is flowing again, but scale, specialization, and execution—not beta—are driving outcomes.

Read the Full Report HERE

TREND OF THE WEEK

Continuation Vehicles Are Becoming a Necessity, Not a Preference

Private equity is not embracing continuation vehicles because it loves financial engineering. It is doing so because exits are not clearing.

The numbers tell the story. Continuation funds launched jumped from 5 in 2018 to more than 130 in 2024, with total volume expected to reach $100B by the end of 2025, up from $35B in 2019. At the same time, firms are sitting on roughly 31,000 unsold portfolio companies, while median holding periods stretched to nearly 6 years, the longest on record.

This is not a niche workaround anymore. It is becoming core exit infrastructure.

Sponsors are using continuation vehicles to manage time rather than price. High quality assets that are not ready for public markets or strategic buyers are being warehoused, recapitalized, and given more runway. LPs are mostly taking cash, with 80–90% choosing liquidity over rolling exposure, effectively turning these vehicles into selective partial exits.

The tension is governance, not demand. Conflicts between selling and buying funds are now front and center, with Delaware litigation looming as a potential brake.

Why this matters for 2026. Unless IPOs and large scale M&A reopen meaningfully, continuation vehicles will keep growing. The risk is not that they disappear. The risk is that they become overused, mispriced, or regulated after becoming indispensable. (More)

LIQUIDITY CORNER

Semi Liquid Is Becoming the Default Liquidity Compromise

The capital mix is shifting fast. In 2020, semi liquid credit made up just 6% of new capital raised. By 2025, it reaches 53%, overtaking closed end credit for the first time. This is not a retail story. It is an institutional response to a broken exit cycle. LPs want yield and private market exposure, but they also want optionality. Sponsors want permanent capital, but cannot promise exits on a predictable clock. Semi liquid vehicles sit in the middle. Interval funds, evergreen credit, and redemption limited structures offer enough liquidity to keep allocators comfortable without forcing sponsors into fire sales.

The implication for private equity and private credit is structural. Liquidity is no longer binary. It is being engineered.

For GPs, this changes product strategy. Fundraising momentum is moving toward vehicles that smooth cash flows and reduce J curve anxiety, even if it means lower headline IRRs. For LPs, it reshapes portfolio construction. Capital once reserved for public credit or short duration strategies is migrating into private structures with controlled exits.

Bottom line. When exits stall, capital does not wait. It adapts. Semi liquid is no longer a niche. It is the market’s answer to prolonged illiquidity. (More)

MACROVIEW

Inflation Is Calm — But the Risks Are Shifting

US inflation has cooled markedly since its 2022 peak and now sits just below 3 percent. By itself, this looks reassuring. Yet inflation remains above the Federal Reserve’s 2 percent target, and the sources of price pressure have shifted in ways that complicate the policy outlook.

Goods prices have largely normalized, but services inflation — especially shelter and healthcare — remains sticky. This makes further disinflation harder to achieve through interest rates alone. At the same time, inflation risks are no longer purely economic. Growing political pressure on the Federal Reserve to cut rates in order to lower government borrowing costs raises concerns about fiscal dominance, where monetary policy becomes subordinate to fiscal needs.

That would be dangerous: if investors doubt the Fed’s independence, inflation expectations could rise even while current inflation looks contained.

The bottom line: today’s inflation is calm, but preserving credibility and institutional independence may matter more for future price stability than any single data release. (More)

COMPLIANCE CORNER

Valuation Standards for Illiquid Assets: Heightened Scrutiny and the Push for Transparency

Valuation of illiquid assets is moving from a technical exercise to a regulatory pressure point. As private equity portfolios grow more complex and LPs demand greater transparency, regulators are zeroing in not just on valuation outcomes, but on process, governance, and oversight. The SEC’s 2025 examination priorities elevate independent valuation frameworks to a core compliance issue. The message is consistent with global signals. Updated IPEV guidance and new SBAI standards push firms toward tighter documentation, clearer disclosures, and defensible fair value methodologies tailored to illiquid holdings.

Why this matters. Valuation controls sit directly upstream of fees, performance allocation, and liquidity rights. Regulators increasingly view weak oversight as an enforcement trigger even when methodologies appear reasonable. Conflicts, unsupported assumptions, and passive board review are all in scope.

The risk is asymmetric. Firms relying heavily on internal judgments without robust third party involvement face outsized scrutiny. In volatile markets with higher interest rates and softer multiples, valuation gaps are harder to explain and easier to challenge.

Bottom line: This is a governance test, not a math problem. PE firms should tighten valuation policies, engage independent experts, rigorously document assumptions, and ensure board level approval is active and evidentiary. In today’s environment, valuation discipline is no longer defensive. It is table stakes. (More)

PUBLISHER PODCAST

No Off Button: Work/Life Lessons To Reach 700,000 Subscribers And #1 In Your Niche

Champions don’t slow down. They don’t wait for shortcuts. And they definitely don’t have an off switch. No Off Button is where Aram sits down with founders and creators who treat their craft like a long game—obsessive execution, high standards, and zero excuses.

This week’s guest is Rocky Xu, a finance filmmaker who built a 700,000+ subscriber audience and became #1 in his niche by skipping the creator playbook entirely. From day one, Rocky approached YouTube like a media company—producing Netflix-level documentaries from his bedroom and focusing on assets that compound, not viral hits.

The conversation digs into lessons PE minds will recognize instantly: why consistency beats hacks, why distribution is power, why AI is a tool—not a replacement for judgment—and why real value is built by owning evergreen catalogs, not chasing weekly spikes.

Why it matters: this is capital allocation and brand-building logic applied to media. Long-term thinking, defensible taste, and doing the work when no one’s watching.

Watch the Episode

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