Working at a Zombie Fund? Plan Your Exit Strategy!

Recently, a new challenge has arisen within the private equity sector, transforming healthy firms into entities akin to the undead. This transformation isn't due to supernatural or sci-fi causes but arises from a significant slow-down in deal activity, investors showing greater discretion, and broader economic factors. These elements have turned some private equity funds into operations focused on liquidating outdated holdings before shutting down entirely.

The term 'zombie fund' is interpreted in various ways, but whichever way it's defined, being associated with one could hinder your career prospects. Some characterize a zombie fund as one that has missed its window for new investments yet still retains capital. Others describe it as being unable to secure fresh investments, governing its existing portfolio without growth. Yet another perspective views it as a fund that, while having invested, delays returning profits to investors, aiming to continue drawing management fees.

Identifying a Zombie Fund

The label 'zombie fund' has become more prominent due to a sustained lag in mergers, acquisitions, and public offerings, creating a drag on private equity transactions and investor payouts. Data from PitchBook highlights an uptick, with US funds not investing within a year, despite securing capital in the previous six years, rising by 50% to 651 by mid-2025. Internationally, these figures rose 40% to 1203 funds in the same timeframe.

Time to Move On?

Recruiters advise those working in such funds to consider other opportunities when signs of this 'zombification' appear, though not all slow periods are alarms. If a firm isn't planning future fundraising, seen as essential for growth, exploring other market opportunities should be the next step. This is particularly crucial for those in fundraising roles, where cultivating capital and strong investor relations are vital measures of success.

Bill Matthews from BraddockMatthewsBarrett suggests that those in investment roles also need a strategic move away, as association with a zombie fund could tarnish their investment history. He emphasizes that maintaining an active track record is critical, and stagnancy can be professionally detrimental.

Yet, a downturn in fundraising activities doesn’t always spell disaster and might arise from market shifts rather than investor dissatisfaction. It’s pivotal to stay engaged during these slower periods by nurturing existing relationships and forming new ones, which could be advantageous when returning to fundraising efforts, as advised by Lisa Steele, a partner at BraddockMatthewsBarrett.

Strategizing Your Next Move

When seeking new opportunities, being part of a zombie fund shouldn't be hidden from potential employers. Transparency can reflect positively, provided it's presented carefully. Matthews notes that recruiters will likely be aware of which funds are struggling from their industry insights.

Jessica Xu from Selby Jennings highlights the importance of honesty regarding why one may wish to leave a current firm due to its zombie status. Candidates should refrain from disparaging their present workplace or revealing sensitive performance data. Instead, focus discussions on the personal growth and strategic contributions one could make in a more vibrant firm.

By portraying oneself as a strong contributor looking to optimize one’s environment, candidates position themselves as an asset worth investing in. Moreover, with zombie funds being a recognized phenomenon, seeking out better opportunities due to such affiliation is deemed a reasonable career decision.