Private equity firms face decline as fundraising struggles create zombie funds

The total number of active private markets firms peaked 18 months ago and is now shrinking as many groups fail to raise fresh money. Arctos Partners Chief Executive Officer Ian Charles shared this update at the Bloomberg Invest conference in Dallas. His firm tracks groups that raised money over the last seven years, and this database is shrinking for the first time ever. Charles notes that more groups are turning into so-called zombie firms faster than new ones are starting up. Meanwhile, about $3 trillion was raised globally for buyout funds between 2018 and 2023, and 57% of that money sits in funds at risk of failing to generate carried interest.

Strong Players and Sports Deals

While weaker groups struggle, strong firms find the current market very attractive. Charles expects this year to rank as the fifth or sixth best for fundraising in total dollars. At the same time, Arctos finalized a deal earlier this year to buy a 10% stake in the Atlanta Falcons, making it the fourth NFL team in the firm's portfolio. The firm also boasts eight full or partial exits over the past 12 months, returning nearly $1 billion to investors.

Context

Private equity firms pool money from institutional investors and wealthy backers to buy and build companies or assets like sports teams. When these firms fail to raise new funds or deliver expected profits, they struggle to survive in a competitive market.