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One of the world’s largest sovereign wealth funds is suing a US private equity firm, accusing it of attempting to short-change investors on the sale of a portfolio company to another one of its funds.
The Abu Dhabi Investment Council is seeking to block Energy & Minerals Group from selling its stake in Ascent Resources, one of America’s largest private gas drillers, to one of the private equity firm’s sister funds. The sovereign fund alleges the deal undervalues Ascent while generating a windfall for the new fund managed by EMG.
The wealth fund said in a court filing unsealed on Wednesday: “Defendants are trying to force a conflicted sale of EMG fund assets to a continuation vehicle to reap a massive benefit for themselves at the expense of ADIC and the other investors to whom defendants owe fiduciary duties.”
The dispute sheds new light on the potential conflicts of interest that arise as private equity firms increasingly exit ageing deals by selling companies between funds they manage instead of taking them public or finding outside buyers such as large corporations or other buyout groups.
Such transactions, known as continuation fund deals, have grown in popularity in recent years as private equity groups have struggled to find buyers for trillions of dollars in unsold assets. Continuation deals amounted to a record 19 per cent of all PE asset sales in the first half of 2025, the Financial Times previously reported. But they are viewed warily by investors, given that buyout groups arrange the deals and are on both sides of the transactions.
An investor in Ascent Resources told the FT they believed the gas driller was worth more than $7bn when including debt. But EMG’s continuation fund plans to buy its over 30 per cent stake in Ascent at roughly a $5.5bn valuation, leaving investors with lower proceeds than what they believe they could get from an initial public offering or a sale to a third party. EMG is also asking to pay its investors over a two-year time period, further lowering the present value of the proceeds, they said.
However, other private equity groups that specialise in energy passed on the deal based on the belief that Ascent was overvalued, other people briefed on the matter said.
EMG, a $12bn Texas-based group founded by John Raymond, the son of former ExxonMobil chief executive Lee Raymond, first invested in Ascent in 2014 when the company, founded by the late shale gas-drilling baron Aubrey McClendon, was called American Energy Partners. It is one of the leading gas drillers in the US with vast resources in Ohio’s Utica shale. In the ensuing decade, many energy-focused private equity groups were stung by deep downturns in the industry. They have since earned lacklustre returns and struggled to raise new money from investors.
EMG’s four most recent funds all have earned net returns of 10 per cent or less, according to public pension documents filed by the Minnesota State Board of Investment. While the group has not announced a new private equity fundraise since 2019, it completed a $1.1bn continuation fund earlier this year for midstream assets it held in decade-old funds.
A continuation fund deal would increase EMG’s ownership in Ascent and restart its ability to earn management fees and potentially lucrative performance fees if the driller’s value rises in the coming years.
The sovereign wealth fund said in its complaint it believed the deal incentivised EMG “to buy out its current investors, including ADIC, at as low a price as possible”.
It also said the PE firm stood to “earn no or minimal carried interest on the asset if an exit to a third-party buyer were to happen now”.
In addition to arguing EMG’s deal might short-change some investors, the sovereign fund criticised the speed at which the private equity group broached the continuation fund deal with its investors and tactics to win their consent which it called “underhanded” and “misleading”, the filing said.
ADIC alleged the PE group coerced investors to support its continuation fund deal by providing them with substantially lower valuations for Ascent than they did to prospective new buyers.
ADIC also claimed EMG concealed alternatives to the fund-to-fund deal, such as internal IPO plans and interest from third-party buyers. It is now asking EMG to launch a formal sale process for Ascent.
The sovereign fund is a part of Abu Dhabi’s broader state-backed investment group Mubadala, which manages more than $300bn in assets and is one of the largest investors in the world.
The sovereign fund said it could not comment on open litigation. EMG and its founder John Raymond did not respond to messages seeking comment.
Additional reporting by Arash Massoudi in London and Chloe Cornish in Dubai