Q&A: New Mountain on the future of liquidity in PE

Aerial view of Manhattan skyline seen from helicopter.

New Mountain Capital has seen a steady stream of exits from its private equity portfolio, even as similar-sized peers have struggled.

Earlier this week, the $60 billion alternative asset manager exited its stake in Lincoln Investment Capital Holdings , a broker-dealer and registered investment adviser it has owned since 2020. The Pennsylvania business grew its fee-based assets under management by around 75% over that period, according to a statement.

This follows the June sale of Cumming Group , a project management business, to Leonard Green & Partners. The deal gave the service provider to the construction industry a valuation of approximately $3 billion, including debt, according to PitchBook data.

At the same time, the New York-based firm has been positioning itself to benefit from the liquidity needs of other general partners and limited partners in the market. The firm is looking to raise up to $2 billion for New Mountain Atlas I, according to a May regulatory filing, its first fund dedicated to backing continuation funds.

CEO Steven Klinsky talked to PitchBook about DPI, the secondary market and what defensible, non-cyclical investing looks like in practice.

The conversation has been edited for brevity and clarity.

PitchBook: Why did you choose to launch a business dedicated to backing continuation funds?

Klinsky: I think the idea of single asset secondaries is a very important and positive evolution for private equity, if it's done right. I've been doing private equity since 1981. One of the great criticisms was always, "Why do they only hold their companies for five years?" Frankly, that was the set of rules that always existed between GPs and LPs, and it is extremely important to get cash back to the LPs.

But every so often, let's say one out of every 10 or 15 companies, a firm could have a situation where they've spent five years building a company, getting the management right, getting the strategy right... Maybe they doubled or tripled the value, and they see a clear path to double or triple it again.

You don't want to force LPs to stay in longer than they expected. On the other hand, you don't want to keep them from staying with the opportunity. The Solomonic answer is to say, in as frictionless a way as possible, you can stay, or you can go.

For a long time, continuation funds were mentioned alongside long-hold funds as a way for PE firms to own good assets for longer. Have continuation funds won out?