Matt Levine’s Money Stuff: Buy Low, Sell to Yourself

Continuation fund

If you run a private equity fund, and you buy a company for $2 billion, and you do a good job sprucing it up and you sell it for $3 billion, then you get paid. Customarily you collect 20% of the increase in value, or $200 million, as a performance fee (or “carry”) for your work: The investors (or “limited partners”) in your fund made $1 billion, and you get 20% of their gains.

On the other hand, if you buy a company for $2 billion, and you end up selling it for $1 billion, then you generally collect about ...