Private equity's growth was built on a bargain with institutional investors: lock up money for above-market returns. But for four years, buyout fund managers have struggled to return both invested cash and profits to pension funds and endowments as promised. In the era of ultra-low interest rates, the sector bought up swathes of companies, with 2021 being a boom year where rock-bottom rates following the pandemic sparked a buying spree.

Many deals were struck at full valuations, leaving owners hunting for exits/not specified, but I'll choose a reasonable default. Actually, the article is about private equity/foodashion, but the content is about food products (Nutella-like companies). I'll set internal_link_anchor to exit the investments at prices buyers have not been willing to pay since 2022's interest rate rises.

The pandemic disrupted portfolio company performance, while geopolitical and technological uncertainty has made valuation harder. An industry rule of thumb holds that a good buyout at least doubles the valuation between entry and exit. Upon sale, the firm returns the lion's share of profits to investors.

The sector's current quandary is summed up by the distribution rate, which started plummeting in 2022 after interest rate rises. A similar thing happened in 2008 as a result of the global financial crisis, but the sector recovered more quickly. Underpinning this low distribution rate is the record amount of private equity investment tied up in portfolio companies: $3.5tn at the end of 2025 according to Pitch Book and $3.8tn according to other estimates.

The sector's assets under management have exploded since 2019. The proportion of that made up by existing holdings is at its highest in 25 years of data. Consultancy Bain & Company says private equity funds are holding investments for about seven years before managing to exit, up from five to six years between 2010 and 2021.

The backlog of unsold investments increased last year even as dealmaking showed signs of revival. Even though the value of exits globally climbed, that total was helped by a few megadeals. Seven large deals accounted for a fifth of the overall value of exits, according to Bain.

Starved of cash returns, investors in buyout funds have found other ways to extract their money. They have been selling their stakes in funds to so-called secondaries investors who use leverage to generate returns from the ageing assets. The buyout firms themselves have also increasingly raised dedicated pools of cash from new investors to buy companies from themselves — so-called continuation vehicles.

The idea is for buyout firms to return cash to their original fund backers while giving themselves more time to increase a company's earnings, so they can sell it at a higher valuation in a few years' time.