Key Takeaways
- • $1.2 trillion in zombie private equity assets now represents 12% of global PE assets under management, defined as funds over ten years old that have stopped making new investments while holding unsold portfolio companies.
- • Year-over-year zombie fund growth of 38% with the stock nearly tripling since 2019, driven by massive PE fundraising between 2018–2020 followed by a subsequent dearth of exit opportunities.
- • GPs continue collecting management fees on potentially inflated net asset values while holding portfolio companies they cannot sell without recognizing losses or sacrificing incentive fee participation.
- • Over half of institutional investors surveyed by Coller Capital expect zombie fund numbers to increase within their own portfolios over the next two years, citing prolonged holding periods and elevated pre-rate-hike valuations as primary drivers.
- • $2 trillion zombie fund threshold projected within the next few years as fund vintages from the 2018–2020 fundraising boom continue to age beyond their target exit windows.
Summary
The private equity industry faces a mounting accumulation of aging, underperforming assets that have created what Treo Asset Management terms "tail end" funds—colloquially known as zombie funds. These vehicles, defined as funds exceeding ten years in age that have ceased making new portfolio investments while retaining unsold companies, now represent a material portion of the global PE ecosystem. According to analysis by Treo based on 2026 data from Preqin, PitchBook, and Jefferies Global Secondary Market Review, zombie funds account for approximately $1.2 trillion, representing 12% of total global private equity assets under management.
The growth trajectory of this segment has been dramatic. Finbarr O'Connor, founding partner of Treo, notes that zombie fund valuations have expanded 38% year over year and have nearly tripled since 2019. This acceleration reflects a structural imbalance created by the industry's aggressive fundraising cycle between 2018 and 2020, followed by a pronounced shortage of viable exit opportunities. The market timing mismatch has left GPs holding portfolio companies that cannot be divested without either recognizing significant losses or sacrificing carried interest participation, creating a perverse incentive structure where managers continue collecting management fees on potentially inflated net asset values.
Institutional investor sentiment confirms expectations for further deterioration. A recent survey by secondary PE firm Coller Capital found that over half of respondents anticipate zombie fund prevalence in their own portfolios will increase within the next two years. Coller attributed this trend to two interconnected factors: structurally longer holding periods across portfolio companies and the elevated valuations PE firms paid during the pre-rate-hike environment, which have now "come home to roost" in investor portfolios. Treo projects the zombie fund market will expand to approximately $2 trillion within the coming years as fund vintages from the 2018–2020 fundraising cohort continue aging past their intended exit horizons, establishing zombie funds as one of the fastest-growing segments within the broader private equity marketplace.
The growth trajectory of this segment has been dramatic. Finbarr O'Connor, founding partner of Treo, notes that zombie fund valuations have expanded 38% year over year and have nearly tripled since 2019. This acceleration reflects a structural imbalance created by the industry's aggressive fundraising cycle between 2018 and 2020, followed by a pronounced shortage of viable exit opportunities. The market timing mismatch has left GPs holding portfolio companies that cannot be divested without either recognizing significant losses or sacrificing carried interest participation, creating a perverse incentive structure where managers continue collecting management fees on potentially inflated net asset values.
Institutional investor sentiment confirms expectations for further deterioration. A recent survey by secondary PE firm Coller Capital found that over half of respondents anticipate zombie fund prevalence in their own portfolios will increase within the next two years. Coller attributed this trend to two interconnected factors: structurally longer holding periods across portfolio companies and the elevated valuations PE firms paid during the pre-rate-hike environment, which have now "come home to roost" in investor portfolios. Treo projects the zombie fund market will expand to approximately $2 trillion within the coming years as fund vintages from the 2018–2020 fundraising cohort continue aging past their intended exit horizons, establishing zombie funds as one of the fastest-growing segments within the broader private equity marketplace.
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