What’s Behind the Spin-Out Wave
Over the past few years, I’ve watched a number of private equity professionals leave good firms to build something of their own.
At first, I took each one as its own story. But the pattern kept repeating. It started to look less like a series of one-offs and more like a signal about where private equity is in its own life cycle.
As the old line goes, history does not repeat itself, but it does rhyme.
None of this is new. The industry is, in a sense, echoing its own origin story. Many of the most important firms in private equity were started by small teams who left larger platforms with a clear edge, a network, and enough conviction to build on their own.
KKR is the purest example. Jerome Kohlberg, Henry Kravis, and George Roberts left Bear Stearns in 1976, carried a differentiated approach to leveraged buyouts with them, and built one of the most important private investment firms in the world.
The pattern showed up again in the middle market. After the financial crisis, the Volcker Rule made it harder for banks to own or sponsor private equity funds, helping push many captive deal teams to spin out. Same founder instinct, helped along by regulation.
So maybe the entrepreneurial impulse showing up here and there among today’s professionals isn’t a fluke. It’s woven into the industry’s DNA.
That instinct may always be there. The question is what pulls it forward.
Why now?
We all know exits have slowed considerably, but the data is still stark.
According to Bain’s 2026 Global Private Equity Report, distributions as a share of net asset value have stayed below 15% for four straight years, an industry record. A lot of value is sitting in portfolios, waiting for a clearer path out.
That is the analytical version of the story. The same dynamic is also showing up inside firms.
I was recently listening to an episode of Ted Seides’ Capital Allocators podcast featuring the co-founders of Garnett Station Partners. They framed this moment as a recruiting opportunity.
As one of them put it, “One of the effects of the DPI problem in the broader industry is not just on LPs, it's also on investors. You think about VP, principal, MD, even partner-level investors have been at funds for a while and haven't seen their carry paid out. There are succession logjams that have only gotten worse.”
Garnett Station’s response has been to go “on offense to recruit talent from other great firms.” Their read was that this makes those people more recruitable.
Mine is that it also makes some of them leave, not just for another seat, but to go build something of their own.
But it’s not universal.
It’s easy to overstate the trend. The slowdown is real in aggregate, but far from universal. Plenty of professionals are sitting on meaningful, hard-earned carry at excellent firms, in seats they have no reason to leave. For them, the spin-out trend is something they read about, not something they feel.
Why some leave, and why most don't
Private equity recruits for a specific temperament: smart, driven, competitive, comfortable with risk, wired to want ownership of outcomes. Then it spends years training that person to think like an owner, to sit across from founders, and to underwrite businesses.
I’ve seen this pattern up close.
One professional left to build a roll-up strategy in an industry he knew well.
Another spun out to launch his own fund in a familiar corner of the market.
A third took the independent sponsor path, raising capital around a business he believed in.
But for every person who leaves, many more feel some version of the same pull, weigh it, and stay for reasons that are often very rational.
What I take from it
When someone tells me they are thinking about leaving, the pull usually traces back to one of two things. Either the work has stopped feeling like theirs, or their wealth feels stuck.
Those are very different problems, even if they can feel similar in the moment. One is about ownership and ambition. The other is about liquidity, timing, and the long arc of private equity compensation.
The spin-out wave is interesting because it sits right at the intersection of both.
Important Information: Axiom Private Wealth, LLC ("Axiom") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Axiom and its representatives are properly licensed or exempt from licensure. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor. The views expressed in this commentary are subject to change based on market and other conditions. These materials may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. Past performance shown is not indicative of future results, which could differ substantially. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Asset Allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss. Diversification does not ensure a profit or guarantee against loss. All investments include a risk of loss that clients should be prepared to bear. The principal risks of Axiom's strategies are disclosed in the publicly available Form ADV Part 2A. Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries. For additional information, please visit our website at www.axiomprivatewealth.com. For current Axiom information, please visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with Axiom's full legal name or CRD #307388.
