Broadcast Retirement Network’s Jeffrey Snyder discusses private equity performance with Eileen Appelbaum, PhD, of the Center for Economic and Policy Research.
Jeffrey Snyder, Broadcasting Retirement Network
Dr. Appelbaum, it’s a pleasure to see you again. Happy New Year and thanks for joining us this morning. I’m glad to be back with you.
Let’s talk about some additional research you and the team have done. And I want to start by looking ahead to 2025. How did private equity do last year overall?
Eileen Appelbaum, PhD., Center for Economic and Policy Research
Private equity hasn’t fared too well and buyout funds in particular have been suffering. The entire private equity segment is overloaded with companies that can’t sell. This has been a problem for them since mid-2022.
And we see that the inability to sell companies to return cash to their investors means they have less cash to invest in subsequent funds. And they’re also a little timid because they now invest in funds that often have companies that are 12, 13, 15 years old. Zombie funds where it is quite clear that the companies will never be sold.
This does not make private equity investing really attractive to institutional investors. And I’m not saying that funds aren’t being raised. It has gone down every year, 23, 24 and 25.
Fundraising was worse than the year before and plummeted by 23. So that’s really their problem, the big problem.
Jeffrey Snyder, Broadcasting Retirement Network
And what are some of the headwinds you face? I mean, I understand that maybe they are not restructuring these companies and selling them to raise capital to realize their investment, but is it because of the economic environment? Is it interest rates?
What kind of explanation is there?
Eileen Appelbaum, PhD., Center for Economic and Policy Research
I think it’s partly a self-inflicted wound. In 2022, when public markets sink private equity funds whose unsold companies, portfolio companies, their value is determined by the general partner who has an obligation as part of the private equity firm that sponsored the fund. And then everyone said, oh, we didn’t suffer at all or we barely suffered.
The market fell 20%. Our companies fell 4%. Aren’t you glad you invested with us?
It seemed very good in the books, but in the end everyone knew that these companies are overvalued. You really can’t sell overvalued companies. Who wants to buy them?
But the second thing is that you are right about interest rates. At the same time that private equity funds were not marking the market, the Fed, which was fighting inflation derived from the pandemic, increased interest rates by more than 5% between March 2022 and July 2023. Well, if you have high interest rates and overvalued companies, it is really a formula for not being able to sell them.
And then that is a formula for few exits, no cash back, no cash back, but with cash back limited to institutional investors who then also renew on a limited basis. And fundraising in 2025 will actually be worse than it seems because the 10 largest private equity firms took almost all of the fundraising. So the other 4,000 funds out there aren’t doing very well.
Not everyone was fundraising, but those who were aren’t doing too well. Therefore, this is a serious problem for the industry.
Jeffrey Snyder, Broadcasting Retirement Network
Yes. And I think, well, I want to ask you, you mentioned institutional investors. And when I think about institutional investors, I think about pensions, I think about endowments, I think about foundations.
They are based on what you wrote in your study and what you expressed this morning; There seems to be a slight setback. Why is that? Do they see something that maybe the rest of us don’t see or maybe something that you see?
Eileen Appelbaum, PhD., Center for Economic and Policy Research
Well, no, I think it’s exactly the fact that the cash hasn’t been returned. And then if you’re going to invest, you’re going to try to find the private equity companies that you think will do the best. And this is a handful of well-known names.
Maybe it’s just the brand that attracts the money. But overall, fundraising has been very low compared to before 2022. So that’s really your problem.
Jeffrey Snyder, Broadcasting Retirement Network
Is there any semblance of hope regarding 2026? I mean, we’re barely into the new year. So I don’t know if we can predict future results.
When I worked at a mutual fund company, they said that past performance is not indicative of future results. But seriously, are there fewer economic obstacles now or what could be expected?
Eileen Appelbaum, PhD., Center for Economic and Policy Research
So I think there has been some adjustment to the new interest rate environment and interest rates are lower than in 2022 and 2023, substantially lower from about five and a quarter to three and a half percent in the federal funds rate. So I think that might be a small improvement. I think if the economy, if the AI ​​bubble doesn’t burst, there’s no reason to think there’s going to be a recession.
Then there will be a relatively strong economy. Interest rates remain high. They have not returned to the zero interest rate environment that private equity loves.
But I think they have adapted. So I think 2026 will be better than 2025. But the excess of unsold companies is huge.
It’s huge. You’re not going to solve it in just one more year. It will probably take a few years to really get back to normal.
And I don’t know where this part of the industry will be by then.
Jeffrey Snyder, Broadcasting Retirement Network
Let me ask you, I want to take a minute to recap our conversation. But let me ask you a question again. Last week we had a program on the state of alternative investments.
That’s crypto, private markets, defined contribution real estate, or what most people would consider a 401k plan. I want to get your information and we’re still waiting on regulations and other information, I guess, from the federal government, specifically the Department of Labor. What is your reaction to that?
Will that inflow, potential cash inflow, help these companies?
Eileen Appelbaum, PhD., Center for Economic and Policy Research
It will definitely help the industry, but is it good for workers? I doubt it will be good for the workers. These are funds with high fees.
They have all these unsold portfolio companies that they can’t get rid of and that they would like to sell to someone or maybe have money to improve them. I don’t think that the funds that these workers are going to invest their retirement money in are going to be top-tier funds. We know that many funds have what are called dogs, companies that have been in the portfolio for more than 10 years and are unlikely to be sold or will do so at a deep discount.
So this is not the time to get into private equity if you’re not a really sophisticated investor. As for other things, I mean, my opinion on cryptocurrencies is that it is a situation that will lead to a disaster for that industry. It really has no use value other than criminal activity and operates on momentum.
Everyone thinks it will increase, and it does. Everyone thinks it will go down, and it does go down. There is no use value.
It doesn’t have something that you can use, it’s not like gold that you can use for jewelry or for electronic parts. It has no use other than illegal activities or that he would like to hide from someone, maybe his wife, I don’t know. But anyway, from the public for sure.
So cryptocurrencies are not a good bet. Real assets like infrastructure and real estate can be worth it. But I just think people need to be able to know that their retirement will be there.
They need to have transparency. They need to have liquidity. Private equity has a hard time any of these alternative strategies providing it.
I don’t think it is a good agreement for the workers.
Jeffrey Snyder, Broadcasting Retirement Network
Dr. Appelbaum, we had a great discussion this morning. I want to give you about a minute to recap. What do you think are some of the key takeaways from our conversation?
Eileen Appelbaum, PhD., Center for Economic and Policy Research
Well, I think the key takeaway is that outflows aren’t increasing enough and cash isn’t being returned and we couldn’t really talk about that. But general partners at private equity funds engage in financial engineering. And I don’t think that’s going to end any better for investors than it does for the companies where they engaged in financial engineering.
They’re finding ways to return cash to investors that actually significantly increase the risk for those investors but make a lot of money for the general partner and the private equity firm. I am thinking specifically of so-called continuation vehicles that give very good results to the general partner and put the limited partners at risk.
Jeffrey Snyder, Broadcasting Retirement Network
Well, Dr. Appelbaum, I appreciate you coming on the program. I think I’ll have to educate myself a little more. This is a market I have ventured into but want to learn more about.
I appreciate you coming and we will bring you back very soon. Okay, thank you very much.
This story was originally published by TheStreet on January 21, 2026, where it first appeared in the Retirement section. Add TheStreet as a preferred source by clicking here.
