Private equity’s three-year deal slump has worsened a longstanding problem: billions of dollars of aging, underwater funds that continue to cost investors money.

The slowdown in mergers and acquisitions that began in 2022 has made private equity less profitable and reduced the amount of money firms return to investors. While this year began with hopes of a recovery, the slump has persisted, and shares of the biggest firms— Blackstone, Apollo Global Management  and KKR — are down 10% or more in 2025. Over the same time, the S& P 500 has risen roughly 5%.

Beyond hitting profits, the slump has delayed the timeline for private-equity firms to sell investments, adding to the pile of so-called tail-end funds, those a decade or more old.

Firms had $668 billion of private-equity assets globally stuck in tail-end funds as of the most recent data, from the end of 2023, 19% higher than the previous year, according to a forthcoming report from Treo Asset Management, a special-situations firm.

“Funds are getting older, and the holds are getting longer,” said Finbarr O’Connor, Treo’s chief investment officer and founding partner. While the report is based on data more than a year old due to a lag in when firms issue financial data, O’Connor says the trend continues, and he forecasts tail-end assets to hit $1 trillion in coming years.

Many of these deals are underwater. The Treo report showed more than a third of assets held eight years or more are worth less than the initial capital invested.

These stuck funds can be a double blow for a fund’s backers: Often unsuccessful investments that are hard to sell, they raise investor costs by extending the annual management fee for years past the usual term.

Fund limited partners are likely paying between $3 billion and $13 billion a year in management fees on the $668 billion in tail-end assets, based on the typical fee range of 0.5% to 2% of net asset value, according to Treo’s estimate. Firms often reduce a fund’s management fee from the industry-standard 2% once it enters tail-end territory— but rarely all the way to zero.

The report underscores some of the cascading effects of private equity’s exit drought. In the U.S., firms’ combined exit volume in the nearly 2½ years since the start of 2023 remains below the 2021 sum alone, according to research provider Pitch-Book Data. By 2023, U.S. firms’ median investment hold time had climbed to a record high of seven years, and it remains near the historic peak.

U.S. buyout firms held nearly 12,400 unsold companies as of the first quarter of 2025, a seven- to eight-year backlog at the current pace of sales, PitchBook says.

Private-equity investors have grappled with the problem of old, struggling investments for years.

Selling tail-end stakes on the secondary market is hard, because most buyers want bluechip assets, not old funds full of odds and ends. Continuation funds are a popular way to extend promising assets, but are less viable for those of uncertain or little value.

Removing a fund’s general partner and installing a new one to wind down the assets is something more investors are considering now amid the sales slowdown, O’Connor said. It is considered a drastic step, and happens rarely.

Often, investors have no better option than to be patient and wait for a sale. But that leaves the question of fees, and how to best motivate managers to sell and wind the fund down.

More investors “are scrutinizing the fee model” of these late-stage funds, said Runjhun Kudaisya, a partner in the private- funds group at law firm Goodwin Procter. With average fund life—which used to be 10 to 12 years—now stretching toward 15 years, “there has been a shift in the market” and fund backers increasingly try to negotiate late-stage fees CERTAINLY TIME TO STOP INVESTING WITH THE BIG NAMES. THE ONLY THINGS THEY ARE GOOD AT IS GETTING FEES!