> Some good news: Rising Rates Will Make Private Equity’s Bad Year a Lot Worse

The zombie nightmare haunting private-equity firms isn’t ending anytime soon.

The Federal Reserve’s decision to raise interest rates on Wednesday will deepen problems in their portfolios from a generation of buyouts that are stuck. Investors have been clamoring to recover a record $349 billion in these “zombie funds,” but higher rates will make deals even more difficult, meaning that number is likely to grow.

Private-equity firms came into 2026 hoping for relief. President Trump appointed Kevin Warsh as the Fed’s new chairman and the expectation was for rates to be cut. Deals were picking up. Higher interest rates hit private-equity funds on multiple fronts, including by increasing what companies they own must pay on loans and making it harder to sell the companies at a good price.

Thoma Bravo, a longtime tech investor, lost a $5 billion investment in customer-service software maker Medallia this year when the company defaulted and lenders took over control. The fund manager has been in talks with debt investors to extend the loans it used to buy several other more stable software makers, including cybersecurity company Sophos.

Lenders have marked down by more than 30% their valuations of a $2.1 billion loan to human-resources software maker Cornerstone OnDemand and a roughly $1.5 billion loan to healthcare software company Symplr Software, according to regulatory filings by private-credit funds. Clearlake is discussing options with holders of both loans.