Private equity firms can’t sell their companies fast enough. This untenable position is leaving scores of eager investors with money that’s out of reach. These challenges heap additional burdens on these firms as they stumble through the myriad barriers to selling. At the same time, capital stuck in so-called “zombie funds” continues to grow. This new trend has frightened investors, who are clamoring to see a liquidity event from their investments.
In 2025, private equity investments reached an all-time record. This ratio of these investments to eventual successful exits reached an alarming peak of 3.14 times, per PitchBook data. That figure is the highest exit-to-raising ratio since 2013, a sign of an increasingly tight market for private equity exits. Firms are finding it hard to move their assets off their balance sheets. Consequently, the capital under these obsolete funds is stuck in limbo, locking out investors and not allowing them to make back what they’ve invested.
Smart, strategic private equity firms have built their recent success on a number of factors. Add to that a current economic climate fraught with uncertainty, and you have a situation where buyers are understandably taking a wait-and-see attitude. On top of that, egregious valuations done over the past few years have created a huge gap in what firms can get negotiated on a sale price. Half of all private equity firms are currently waiting longer to exit than they planned. This combination has formed a logjam of unsold businesses.
The impacts of this frustrating status quo go well beyond the companies involved. Investors who were counting on returns are instead suffering blows as their capital continues to languish in these funds. The staggering investment-to-exit ratio reveals a growing problem for private equity firms. So they need to focus on strategies to pivot and adjust to the new economic realities of the marketplace.
Industry experts are sounding the alarm. If these exits keep up, private equity firms could find themselves under further scrutiny to rearrange their own portfolios or look for other ways out. The collapse raises fears about the overall health of the private equity industry. It undermines its own promise to provide robust returns for investors in the long term.