hebel. today · 2 November 202658 / 69
Business · Venture Capital Insights
Private Equity Struggles with Liquidity and Valuation
Private equity firms are currently struggling to return capital to investors, with global distribution rates collapsing from roughly 24% between 2015 and 2019 to 9.6% since late 2021. This decline stems from rising interest…
From 5 newsletters · 1 min read · one thing to try
Private equity firms are currently struggling to return capital to investors, with global distribution rates collapsing from roughly 24% between 2015 and 2019 to 9.6% since late 2021 (Young Money by Jack Raines). This decline stems from rising interest rates, which have reduced the value of future cash flows and made refinancing more expensive, ending a three-decade boom driven by cheap debt (Young Money by Jack Raines). As these distributions dwindle, limited partners are increasingly hesitant to allocate new capital to underperforming funds, creating a market dominated by zombie funds holding assets marked at inflated prices that rarely find buyers.
“The ellipsis between non-consensus and right has gotten long enough to be a death valley now.”
GROUNDWORK
To address the exit problem, fund managers are turning to the secondary market, where global transactions reached $124 billion in the first half of 2026 (365247 Sports). Manager-led continuation funds allow firms to transfer assets into new vehicles, giving existing investors a choice between cash or continued participation. These transactions often carry annual management fees and performance-linked incentives that mirror traditional fund structures. While these arrangements provide liquidity, selling early frequently requires accepting a discount to the net asset value, as seen in multi-asset continuation funds where 40% of deals closed below 90% of their stated worth.
Raising capital has become increasingly concentrated, as firms on their fourth fund or later captured 88.2% of venture fundraising dollars through the third quarter of 2026 (Evalyze.ai). First-time funds are finding it difficult to secure commitments, with the annual count of new funds on pace for the lowest level in a decade (Evalyze.ai). For founders, this means that record industry-wide fundraising totals do not guarantee that every firm on a target list possesses the capacity to write new checks, as many established managers are prioritizing capital for existing portfolio companies rather than new investments.
Try today · 30 min
Build a check-size model for your target fund.
Calculate the fund's total size, divide by the number of companies it targets, then factor in the reserve ratio to find the first-check amount.
You need
- Target fund size
- Total number of portfolio companies
- Reserve ratio for follow-on rounds
Steps
- Identify the total fund size from public reports or databases.
- Determine the number of companies the fund plans to support.
- Calculate the initial check size by subtracting the reserve allocation from the total fund.
- Divide the remaining capital by the company count to find the average first-check capacity.
- Compare this figure against the fund's actual deal history to refine the estimate.