Are you working for a zombie fund? If so, you'd better run!

Business Insider

13-07-2025

Have you heard the news? A new contagion is turning formerly healthy private equity firms into the walking dead. It's not fungal, like in "The Last of Us," a virus, like in "28 Days Later," nor a magical reanimation like the original Haitian Vodou Zombis.
Instead, it's the result of a dealmaking slump, pickier investors, and macroeconomic conditions that have turned some private-equity firms into glorified estate sales, auctioning off their dusty holdings before closing up shop.
There are many definitions of a zombie fund — but no matter how you slice it, it can be bad for your career.
To some, a zombie fund is one that's passed its investment deadline, but is still holding onto capital to invest. Others say it's a firm that can't raise new money and is stuck managing and selling off its current portfolio. Zombie fund can also refer to a fund that has invested capital but is delaying the process of returning money to investors while it continues to collect management fees.
The phrase has picked up steam amid a multiyear lag in M&A and IPOs that has slowed private equity dealmaking and distributions to investors.
Private markets data firm PitchBook said the number of US funds that haven't made an investment in a year, despite raising money in the last six years, is up 50% from 2021 to June 2025, to 651. Internationally, they're up 40% in the same period to 1203.
We spoke to recruiters about the rise of the zombie funds and what that means for people working for them. Here is what they said.
When to run
Recruiters said employees, especially in certain roles, should start job-hunting at the first sign of zombification, though they warned that not every slowdown signals trouble.
"If they are working at a firm that has no plans to fundraise for the foreseeable future, that is usually their sign to go straight to exploring the market," Jessica Xu, head of investor relations recruiting at Selby Jennings, told Business Insider.
This is especially true for people in fundraising roles, where success means growing the firm's assets under management and building strong and deep relationships with investors.
Bill Matthews, partner at BraddockMatthewsBarrett, said it's also true for people in investment roles because a zombie fund will drag down your investment track record.
"Folks have to pick their head up and move," he said, adding, "On the investment side, you want to have a track record of doing deals and exiting deals, and if there's a zombie fund, that's not going to be the case."
Of course, fundraising has slowed across the board and isn't necessarily a death knell. It's important to differentiate between a slowdown due to market conditions and one caused by dissatisfied investors. Just make sure you're keeping busy during the slowdown, said Lisa Steele, a partner at BraddockMatthewsBarrett.
"You're maintaining relationships and keeping current LPs up to date, which is also critically important to these long-term partnerships," she said, referring to limited partners, the industry's catchphrase for fund investors.
You should also be developing new relationships, which Steele said will prove "hugely valuable when you go back to market."
How to interview
A candidate running from a zombie fund may feel tempted to hide their current situation in a bid to make the candidacy more enticing. That would be a mistake, recruiters said.
Matthews said hiring firms tend to know which of their peers are zombie funds from conversations with investors and other intermediaries.
"It's important for candidates to be as transparent as possible with potential employers about their reasons for wanting to leave their current firm, and working at a zombie fund is an understandable reason," Xu said.
The trick is to do it smartly. Recruiters warned against badmouthing the current employer or divulging confidential performance information. Focusing on personal gain is key, they said.
"Many candidates in these situations feel constrained in their ability to drive growth and create meaningful value for their investors," said Xu, adding that they are "seeking environments where they can contribute more strategically."
By focusing on how you'd benefit from moving to a better-performing fund, you come across as a good player on a bad team. And it's worth remembering that there are worse situations to be in.
"A hiring firm's biggest fear is unknowingly hiring another firm's castoff," Matthews said. "A zombie fund situation is obviously a good and valid reason why someone would want to leave."