Private‑equity managers face a new headline: the rise of zombie funds, vehicles that linger beyond their intended life with little chance of liquidation. Investors now label them as a hidden risk, sparking scrutiny from limited partners who fear capital stagnation. This shift threatens to erode returns and complicate exit timelines.

A recent survey by Coller Capital showed that more than half of respondents anticipate an increase in such dormant funds. The report underscores a worrying trend that could drag on portfolio performance and dilute future fund launches. Industry analysts warn that late‑stage assets can tie up capital for years, making it harder to meet liquidity targets.

Virginia’s $134bn state pension system exemplifies the stakes, as its trustees grow uneasy about general partner choices that may prolong fund lifespans. The pension board’s concerns reflect a broader anxiety among public entities that rely on PE for growth. If unchecked, these zombie vehicles could undermine the pension’s return expectations and trigger costly restructuring.

For investors, the takeaway is clear: due diligence must extend beyond launch metrics to assess a fund’s exit strategy. Failure to do so risks locking capital in dormant structures that erode portfolio value. Such oversight can turn a seemingly attractive investment into a long‑term liability, erasing gains and straining limited‑partner relationships.