A rise in zombie funds is attributed to a downturn in private equity dealmaking, causing previously successful firms to struggle. A zombie fund is defined in various ways, such as a fund unable to raise new capital or one delaying returns while still accruing management fees. Private markets data indicates a significant increase in funds that haven't invested in over a year. Recruiters recommend employees begin seeking new opportunities at the first signs of their firm becoming a zombie fund, though caution is advised as not all slowdowns indicate a critical issue.
Zombie funds are emerging as private equity firms struggle with a dealmaking slump, causing reputational risks for employees working in these diminishing firms.
The label 'zombie fund' applies to private equity funds that fail to make investments while still collecting management fees and holding onto investor capital.
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