Meanwhile, the industry’s biggest names have been tapping some of that newfound liquidity for a variety of uses.

In 2016, Vista co-founder Brian Sheth reportedly dropped $38 million on a Los Angeles mansion and two years later spent $16 million on a neighboring property. He also has become a leading wildlife conservationist with his foundation committing $60 million largely to environmental initiatives, according to its website. He pledged more than $13 million to a youth club in Austin, Texas. David Miller, co-founder of Houston-based EnCap Investments, donated $19 million to his foundation in 2016, months after Dyal acquired 20% of his firm.

Owners and buyers stress that such deals are more about providing capital to bolster investing lines, helping general partners meet their commitments in funds they’re raising and enabling succession planning -- and typically have little to do with rewarding founders.

Typically more than 75% of the money from these investments goes back into the firms, according to a person familiar with the transactions. Vista’s Dyal deal helped it scale and boost its fund offerings without going public while Platinum Equity is using proceeds from its 2017 sale to build out a credit platform and grow its operational capabilities.

Still, the practice can generate uneasiness.

“Investors are now bracing for this kind of news,” said Andrea Auerbach, head of private investments at Cambridge Associates, which manages portfolios for endowments, foundations, pensions and family offices. “The capital can be used for lots of different things -- monetizing wealth, opening new lines of business -- and the concern is that can also take focus away from existing funds.”

Lofty Valuations
A 2018 Dyal investor presentation obtained by Bloomberg shows that seven of the 10 deals featured as case studies included some proportion of secondary sales.

No matter where the proceeds of such deals flow, the lofty valuations they bestow upon buyout shops reveal a fresh cohort of billionaires in an industry where such riches have accrued most visibly to the founders of publicly traded firms like Blackstone, KKR & Co. and Carlyle Group LP. They include Vista’s Smith and Sheth, and Starwood’s Sternlicht, according to calculations by Bloomberg.

Some scoff at such paper valuations.

“I don’t care what our firm is theoretically worth -- if I’m not going to sell the rest of it, it isn’t worth anything,” Doug Kimmelman, whose Energy Capital Partners sold a stake to Dyal in a 2017 deal, said in an interview. “It was an effective way to give us a balance sheet and strengthen the financial aspects of our firm.”