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

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

Rod James

Thu, September 3, 2026 at 11:45 PM GMT+3 7 min read

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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.

Steven Klinsky

New Mountain Capital

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?

The lower-for-longer funds are, to me, a very different idea. Let's say you buy 20 companies with a [long-hold] fund. You don't know that all 20 will be good for 15 or 20 years. There may be no companies in those 20 that you want to keep holding longer. [CVs involve] a decision on a specific company based on the market conditions at that time.

A lack of DPI has been a theme for nearly five years now. Is there any sense of normality returning?

We have not had any problem at all with DPI. We've had more cash back to our LPs every year for at least the last five or six years. There are 5,000 private equity firms. [If you take] 5,000 restaurants in New York, they won't all taste the same.

That being said, on average, it has been a much tougher time for private equity, given COVID, inflation, Liberation Day and the Iran War. When you talk to the investment bankers, there's a very long list of companies waiting to start the process of exiting. If good news breaks out [with Iran], you could see a lot of exit activity in the next six to 12 months.

New Mountain has a preference for defensible, noncyclical investments. What does that actually look like in this market?

What we ask is, 'Today, what sectors can grow consistently for the next five to 10 years, even if macroeconomic conditions are not good?' We have 12 sectors staffed up with 25 subsectors, and we slowly evolve the list.

We've been investing quite heavily in areas like infrastructure services, the engineering companies that build out the electric grid. We just sold a business called Qualus this year, which we built up very substantially, and we bought a small electrical engineering company called Commonwealth to do it again.

We've also invested in accounting firms. We had a firm called Citrin Cooperman in our last fund that we built quite successfully, and we have Grant Thornton now. We think AI is actually a help to companies like that, which have big databases with must-have data.

We don't want to bet on oil prices, housing starts, a restaurant concept or a fashion trend. We've always asked the same two questions at every investment committee. Is this investment safe, even if the economy goes bad? And do we have a fighting chance of making our full return objectives?

How much is operational improvement today about the successful implementation of AI?

There are 20 different ways that we try to add value to businesses. AI is a very important part of that. I don't think of it primarily as a way to knock our SaaS vendors out of business. There may be some of that around the edges, but the real question is, how do you make all of your business function faster, better and more efficiently?

We have a company [3E] that tracks the use of hazardous materials in thousands of products. If regulation changes in Malaysia, AI can pick that up, and we can immediately notify all our clients who use that material that the rules have changed. That is something we can do faster with AI. I was around as computers, the internet and cloud came in... It's all been extra improvements.

Do you have a view on frontier large language models versus walled-off, specialized LLMs?

Many of our companies are data-rich and are very carefully protecting their data as a key advantage. We've put a lot of focus on that. Within LLMs themselves, I think there's a clear trend emerging that you may not need the most advanced model to write lead-generation letters to your clients or do basic blocking and tackling. I think you are going to see price competition among various LLMs, simpler ones and more advanced.

Is there an opportunity in buying mispriced software assets in the wake of the sharp correction we saw earlier this year?

I see credit, in some cases, being very much underpriced. But I think it was worse three or four months ago. Our credit arm may loan $30 out of $100 in an acquisition, with someone putting in $70 underneath us. The multiple could fall many times and we'd still be fine, yet the credit gets traded down at a huge discount, maybe at a bigger discount than the equity.

We've done some great software deals, like Blue Yonder. We've always been value-oriented, so we're more likely to lend 6x [as a multiple of EBITDA], with 14x junior to us, than to pay 21x and outbid another firm. We've played it more through credit than by trying to be the aggressive equity player, given concerns that multiples could contract.

What keeps you awake at night?

I don't worry about small things. I started when the 10-year Treasury was at 15.84%, so I'm not too sensitive about interest rates moving by 25 basis points. There are macro threats in the world that will hopefully stay under control through forces larger than me.

I focus on how I can make my team stronger, smarter and more capable. What can we do to get better at AI? What can we do to get better at pricing? What can we do to get better at international expansion? What can we do to get better on everything?

This article originally appeared on PitchBook News