Little more than one year ago, New York City’s Vestar Capital sent a surprising message to its limited partners. After decades of growth, it was scrapping plans for its eighth private equity fund and would instead focus on improving its existing portfolio of companies. Its most recent fund, Vestar Capital Partners VII, launched in 2018 with $1.1 billion but has been limping along with an internal rate of return of 7.7%, significantly lagging the S&P’s average return of 14% over the same period.
Vestar was born in 1988 during private equity’s first boom, the same year a brash NYC firm known as Kohlberg Kravis & Roberts took down mighty RJR Nabisco for $25 billion ($70 billion in today’s terms), back when deals were called LBOs and dealmakers were known as corporate raiders. A lot has changed since then. With more than 15,000 firms worldwide and $9 trillion in global assets, private equity is now mainstream. Vestar’s founders were bankers at First Boston who left to specialize in buying and selling companies like red plastic cup king Solo and Big Heart Pet Brands, known for Milk-Bones. One of their best deals: the $175 million purchase of Birds Eye Foods, sold in 2009 for $1.3 billion.
But now Vestar is looking inward to 12 companies it picked up over the last 13 years, including veggie food brand Dr. Praeger’s, frozen berry processor Titan and PetHonesty, maker of alternative medicines for pets. Vestar hasn’t invested in a single new portfolio company since 2023, and it announced the sale of only one in 2025, unloading cracker maker Simple Mills, in which it bought a stake in 2019, to Flowers Foods Inc. for $795 million.
In an industry built on the constant churn of buying and flipping companies for a profit, Vestar’s future is in question. Its assets under management have withered from $7 billion 15 years ago to $3.3 billion in 2024 as of its latest SEC filing. Vestar declined to comment for this story.
Welcome to private equity’s new era: the age of the PE zombie. Similar stories are playing out throughout North America and Europe, as an industry that was once a golden ticket, minting dozens of billionaires, is going through difficult times. Consulting firm Bain & Co. reported last year that more than 18,000 private capital funds were in the market, collectively seeking to raise $3.3 trillion, but it projected the total amount raised would be only a third of that, with more being allocated to credit and infrastructure funds rather than traditional buyout strategies.
Data from private equity analytics firm Preqin shows that the average fund that closed in 2025 spent 23 months in the market fundraising, up from 16 months in 2021, and fewer funds are meeting their fundraising goals at all. In 2025, a total of 1,191 buyout funds raised $661 billion, down from 2,679 funds and $807 billion in 2021. Blue-chip megafunds continue to attract capital, bucking the trend. Thoma Bravo raised $24.3 billion in its 16th flagship fund last year, Blackstone closed on a $21.7 billion fund and Veritas Capital raised $14.4 billion. Veritas’ billionaire CEO, Ramzi Musallam, told Forbes that consolidation is favoring high performers, adding that “a lot of funds that exist today won’t necessarily exist five years from now.”
Firms that don’t have top-tier performance or unique strategies are getting left behind. In an industry whose lifeblood is fresh capital, there are simply too many funds and not enough dollars in pensions, endowments and other institutions to satisfy all of them. A large number of midlevel firms are becoming zombies, holding onto dwindling portfolios of companies they can’t sell and struggling to raise money to buy new businesses.
“There is existential risk for a number [of funds] because of the fundraising environment,” says Sunaina Sinha Haldea, global head of private capital advisory at Raymond James. “If existing investors don’t come and support them, new investors are highly unlikely to.”
Forbes has compiled a list of 20 big private equity zombies—businesses that are either scaling back, like Vestar, or simply treading water. According to PitchBook, hundreds of established firms in North America and Europe haven’t raised a new buyout fund since 2020. The 20 firms listed above are some of the largest—they either haven’t been able to tap investors in at least five years or have been forced to raise a fraction of the amount of their prior funds.
Private equity partnerships have long been structured to deploy the capital they raise in the first three to five years after closing a fund; then, in the next three to seven years, those investments are sold and profits realized. Add it together and investors expect their cash back and then some about ten years after they invest. Management fees are typically around 2% during the initial investment period and lower afterward. Standard performance fees are 20% after clearing a hurdle which is often set at around 8%.
A top-performing fund that generates lofty performance fees, or carried interest, can make a private equity manager ultra-rich. No fewer than 33 members of last year’s Forbes 400 made their fortunes in private equity. But managers usually don’t struggle financially even if they habitually underperform: Annual management fees keep the lights on in good times and bad, and even for shrinking companies like Vestar they can amount to tens of millions per year. Such fees incentivize firms to raise a new fund every five years or so to lock in a fresh batch of dependable earnings—or to hang onto their highest-priced assets if they can’t flip them for a healthy profit. In the current environment, carried interest windfalls are increasingly rare, especially for firms that overpaid for companies during the runup in asset values afforded by the easy credit conditions that persisted until 2021.
Returns are down across the board. Three-year annualized returns through June 2025 for the Cambridge Associates U.S. Private Equity Index are a mere 7.4%, underperforming the MSCI World stock index by 11 percentage points annually. That’s a steep drop from private equity’s market-beating 14.7% 10-year annualized returns and 13.7% 20-year returns. In many cases, managers are forced to decide between sitting on an asset and continuing to collect management fees or selling, without any prospect of a performance fee, because they failed to meet their 8% hurdle rate. It’s no wonder that the average holding period of buyout deals has increased to 6.3 years in 2025, up from around 5.1 years in 2020.
“Something we’re seeing develop now is general partners who are not able to raise the next fund, but also not willing to sell trophy assets because of the fee stream that’s attributed to those,” says Tom Donovan, global co-head of primary capital advisory at Los Angeles–based Houlihan Lokey. “If they sell the asset, the fees fall away.”
Onex Partners, the largest outfit on our zombie list with $23 billion in assets, closed its fifth flagship buyout fund in 2017 with $7.2 billion, surpassing its $6.5 billion target. The Toronto-based buyout firm had raised progressively larger flagship funds every few years—$3.5 billion in 2006, $4.7 billion in 2009, $5.7 billion in 2015. A $375 million check to acquire Spirit AeroSystems, which manufactures airplane parts, from Boeing in 2005 turned into $3.2 billion in returns by the time it took the business public and sold off the last of its stake in 2014. Onex’s net internal rate of return for its first buyout fund, including that home run, was 38% over a period when the S&P returned 9.5%. That kept investors hungry for more, even as its subsequent funds didn’t replicate that performance, with rates of return between 7% and 13%.
But in 2023, Onex paused fundraising for its sixth flagship fund, a year after it said $1.5 billion of the $2 billion raised to date for the fund would be from its parent company, Onex Corp. Chief executive Robert Le Blanc called the fundraising environment then “the most difficult the industry’s ever seen” at the firm’s 2023 investor day, saying Onex “got caught in a bad part of the fundraising cycle.”
Last year, it did manage to raise $1.2 billion for an “opportunities fund,” but to do so it had to promise its limited partners a shorter two-year investment period than its typical five years. In terms of fresh exits, Onex has been luckier than most zombies. In October it was able to sell a specialty insurer called Convex, which it cofounded in 2019, for $7 billion. But there was no bidding war. Convex sold to the PE firm’s parent company, which brought on AIG as a partner.
Though no one is shedding a tear for private equity fund managers, the fundraising slump has taken a toll on their fees. Total management fee revenue from Onex’s private equity segment has fallen from $146 million in 2019 to $93 million in 2024 and is currently running at an annual rate of $81 million, according to recent filings.
It’s in good company. Chicago’s Madison Dearborn Partners, known for investments such as asset manager Nuveen, Yankee Candle and LA Fitness, has raised a total of $36 billion in eight funds since it was formed in 1992. Its eighth and latest buyout fund closed in 2021 and is logging a 12% internal rate of return (IRR), compared to about 15% for the S&P’s annual returns. It’s reportedly seeking to raise $3 billion for its ninth fund, which would be its smallest raise since its third fund, which closed in 1999.
New York’s Siris Capital closed a $3.5 billion technology buyout fund in 2019. It has an IRR of 8.3%. Over the same period the Nasdaq Composite index posted 16% annually. SEC filings show that it tried to raise $4 billion in 2022 but managed only $339 million. Crestview Partners closed a $2.4 billion fund in 2019, which has recorded an 8.4% IRR, while the IRR for its prior $3.1 billion fund was only 1.4%, less than most people earn on their money market accounts.
“If you had two good funds and then a bad fund, you have some hope. You’ve got to convince people that the next fund will be better,” says Steven Kaplan, a private equity expert at the University of Chicago. “If you’ve had two bad funds, you’re probably out of luck.”
Even more important than IRR, which is essentially an internal (and somewhat fudgeable) estimate, is something called DPI, or the “distributed to paid-in capital” ratio. In simple terms, it means the amount of cash investors have gotten back divided by how much they paid into a fund.
Washington state pension fund documents show that of the $233 million it paid into Vestar’s 2018 fund, it has gotten $140 million back as of June 2025. That equates to a DPI ratio of 0.6x. A decade ago seven-year-old funds typically reported DPIs of 0.8x. Madison Dearborn Capital Partners VIII, a 2020 vintage fund, is so far reporting 0.3x DPI. Consulting firm Bain & Co.’s midyear report last year said the median buyout DPI for 2020 vintage funds in the U.S. and Western Europe was less than 0.2x, while the median DPI for 2019 funds was 0.4x, trailing historical benchmarks for funds at similar stages by more than 10 percentage points.
The illiquidity trend is getting worse. Distribution yields, measuring the percentage of net asset value that is returned to investors each year, have sunk to 11% on average in the last three years from over 25% a decade ago, according to Bain. “No one’s model expected nine-year holds or 10% distribution yields,” says Scott Ramsower, head of private equity funds at the Teacher Retirement System of Texas. “All our models are telling us we should not put as much money into the market in 2026 as we thought we were going to a year ago.”
But never count crafty financiers out. Beleaguered buyout funds have options even when sources of new capital are scarce. So-called “continuation funds” are all the rage now in private equity. They essentially allow PE firms to buy time by cashing out impatient limited partners, while still holding onto certain investments.
After $7 billion (assets) Crestview Partners reportedly paused its latest flagship fundraise, it closed a $600 million continuation fund last year to maintain ownership of two companies it acquired out of an earlier 2015 fund. Despite its difficulties, a firm spokesman insists it “has significant recyclable capital available for investments and is exploring a host of compelling opportunities.”
Many of the zombies on our list, like Vestar, Palladium Equity, Brentwood Associates, Revelar Capital and Norwegian firm FSN Capital, have raised continuation funds in the last two years. Onex is said to be gathering $1.6 billion to explore this route. Evercore’s private capital advisory group reported that continuation funds, which carry lower management fees, raised $62 billion in 2024 and more than $40 billion in the first half of 2025, up from nearly nothing a decade ago.
“Ultimately a continuation vehicle is helpful in terms of the DPI story, it’s helpful in terms of giving a promising asset more runway, but it’s not giving you fresh powder to go out and invest in new deals,” says Sarah Sandstrom, the head of North American private equity placement at London-based Campbell Lutyens. “Most young folks are going to get a lot of satisfaction out of doing new deals, so having a reliable pool of dry powder is an important element of keeping the very best talent.”
Another option is to bring co-investment opportunities to limited partners, which decrease fees and fundraising needs for general partners by enabling institutions to invest directly in portfolio companies. Switzerland-based PE firm Capvis is going further, opting to raise money separately for each deal it pursues after a futile fundraising effort.
What about wealth management and the prospect of trillions in retail money, potentially from retirement accounts, coming to the rescue? Not likely.
“The gatekeepers at the wirehouses, registered investment advisors and banks are very quality-motivated and very size-motivated,” says Raymond James’ Haldea. “Retail has been the foray of the Blackstones and the Areses and so forth.”
That’s bad news for hundreds of middling private equity firms waiting for a lifeboat that may never come.
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