FT News Briefing Private equity recycles assets
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Jul 24, 2025 Tesla's profits have dipped 23%, raising concerns about the electric vehicle market. Private equity firms resort to controversial tactics to recoup client investments. Meanwhile, McKinsey pulls back on generative AI projects in China amid geopolitical tensions. In Taiwan, a recall election could significantly shift the political landscape, especially for the KMT party, as public discontent grows and fears of aligning too closely with China rise. These developments reflect a complex interplay of finance and politics.
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Private Equity's Asset Recycling
- Private equity firms increasingly sell assets back to themselves via continuation funds due to difficult exits through IPOs or corporate buyers.
- This strategy creates a new valuation and offers existing investors cash or reinvestment options, yet can skew incentives toward PE firms.
Continuation Funds Are Here To Stay
- The continuation fund strategy is likely to grow as IPO markets remain subdued.
- PE firms must still find ways to exit about $3 trillion in old deals beyond continuation funds.
PE Faces Exit Challenges
- PE firms face pressure to devise exits beyond continuation funds given the $3 trillion backlog of deals.
- They need active IPOs, corporate buyers, or aligned PE buyers to clear old investments effectively.