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🍋 PE’s Exit Problem Just Got Worse

🍋 PE’s Exit Problem Just Got Worse

Plus: Barclays hit by staff backlash over return-to-office rules, JPMorgan can't model oil, and private credit default rates vary by 18 percentage points depending on the source.

Short Squeez
September 18, 2026

Together With

"I wanted to project myself forward to age 80 and say, 'Now I’m looking back on my life. I want to have minimized the number of regrets I have.'"— Jeff Bezos

Good Morning! US regulators are hunting for evidence of wrongdoing at CEO Mark Walter's business empire and are seeking interviews with Guggenheim employees. JPMorgan analysts say they're unsure how to model oil as the Iran war drags on. And Palantir CEO Alex Karp says AI developers need to be held liable for their own work rather than leaning on government regulation.

The SEC is opening the door for crypto-style trading of US stocks. Blackstone is attempting to facilitate a secondary sale for one of its major real estate funds. And private credit defaults are either 1%, 6%, or 19%, depending on who you ask.

Plus: Barclays hit by staff backlash over return-to-office rules, how Bain Capital Ventures plans to deploy its fresh $1.6 billion fund, and why you should treat your career like an elite athlete.

Petrarch is building a new asset class around a company’s operational data. If you are in private credit or distressed assets, learn more about them here.

SQUEEZ OF THE DAY

PE’s Exit Problem Just Got Worse

PE firms went into 2026 hoping Kevin Warsh would be their guy. Private equity spent the last few years waiting for lower interest rates to finally unlock the hundreds of billions of dollars of companies it can't sell. But this week, the Fed started hiking again.

It’s brutal timing for an industry already sitting on a record pile of aging investments. U.S. private-equity funds that are at least a decade old were still holding $348.5 billion of assets at the end of 2025, up ~65% from 2021.

These funds are called zombie funds and managers are struggling to sell companies they bought when valuations were higher and money was a lot cheaper. Another roughly $500 billion is sitting in funds that are seven to 10 years old, meaning today's record zombie pile has a pretty healthy pipeline behind it.

Apollo's co-president warned this week that the industry is heading for a shakeout, with weaker firms increasingly likely to disappear and go extinct as LPs concentrate money with managers that can actually return it.

Higher rates attack the model from both ends. Buyout firms finance acquisitions with large amounts of debt, much of it floating-rate that moves in lockstep with the Fed, so rate hikes eat directly into portfolio company cash flow. And the next buyer has to finance the purchase at those same higher rates, which caps what they'll pay. The exit gets harder exactly as holding gets more expensive.

And buyout returns came in around a paltry 7% last year, while 2025 marked the weakest fundraising environment since 2020, and the mechanics are making it difficult for LPs to recycle money they haven't gotten back.

Then there's the software problem. PE spent the cheap-money era loading up on software companies at enormous multiples, only to hit something nobody was underwriting in 2021: AI.

Thoma Bravo's ~$5 billion investment in Medallia ended this year with lenders taking control through a recapitalization, and debt tied to other sponsor-backed software names has traded at steep discounts. Much of the 2020-2021 vintage debt comes due in 2027 and 2028, so sponsors will be refinancing highly levered companies at today's rates while working out whether AI has permanently reset what those businesses are worth.

Takeaway: PE's escape route was always cheaper debt. Instead the Fed hiked for the first time since July 2023 and signaled more could come, which leaves an industry with $348.5 billion stuck in decade-old funds holding assets it can't sell at prices it can't accept. Turns out the hardest part of the buyout model isn't the buying.

PRESENTED BY PETRARCH

There is a Bidding War for Spirit’s Data

Spirit Airlines stopped flying in May, but they are still hitting news cycles for the value of their operational data. Google bid $10 million for the airline’s internal files, and a startup, Micro1, put in a higher, post-auction bid at $12.5 million. A judge will decide both the buyer and what the buyer in the near future.

The coveted prize is their ordinary record of running a business: years of emails, spreadsheets, and operating files that don’t ever appear on the balance sheet. Almost no company can sell that, because raw files are full of names, addresses, faces, and logos that expose the people in them and the business that made them.

Credit and PE firms are enlisting Petrarch as their partner in distressed assets. They strip out everything traceable and leave the operational knowledge behind, so records that were a liability walk out the door as an asset that pays.

Book some time with them this week to learn more.

HEADLINES

Markets Rundown

Market Update

Stocks rose as the 10-year Treasury yield eased to about 4.93% and WTI crude fell to about $101.
The Bank of England held its policy rate at 3.75%, as expected, lifting European equities.
The U.S. dollar weakened modestly against most major currencies.

Economic Data

Initial jobless claims fell to 196,000, a two-year low, well below the 206,000 expectation.
Continuing claims dropped to 1.73 million, the lowest since January 2024.
Resilient employment gives the Fed more flexibility to stay focused on inflation.

Housing

Housing starts fell to a seasonally adjusted annual rate of 1.27 million, below the 1.32 million estimate.
Building permits came in at about 1.39 million, also short of forecasts.
The 30-year fixed mortgage rate has risen to 6.95%, tracking higher Treasury yields.

Movers & Shakers

(+) Generac ($GNRC) +18% after the backup generator maker signed a long-term supply deal with Amazon worth up to $8 billion.
(+) Vital Farms ($VITL) +17% because the pasture-raised egg producer is exploring a potential sale or take-private deal.
(–) DraftKings ($DKNG) -8% after Kalshi captured 76% of NFL Week 1 sports betting volume among tracked operators.

Prediction Markets

The iPhone 18 Pro goes on sale today, but there’s still no timeline for the baseline release.
Trade on real-world events with Kalshi. Use code OWS to get a $10 bonus when you trade $10.

Private Dealmaking

Advent International agreed to invest around $328.5 million into Yatharth, an Indian hospital operator
Impulse Space, a developer of highly maneuverable spacecraft, raised $308 million in Series D extension funding
Mazama Energy, a superhot geothermal energy developer, raised $135 million
Sling Therapeutics, a developer of oral treatments for thyroid eye disease, raised $123 million
Perry Weather, a provider of weather monitoring software, raised $110 million
Payward, the parent company of Kraken, raised $100 million from Nasdaq

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

BOOK OF THE DAY

Stop Buying The Hype

Description:
J. F. Dodaro explores how investors can recognize and profit from the recurring cycle of market bubbles, hype, and crashes. Rather than attempting to predict every market move, the book focuses on identifying when investor enthusiasm has pushed asset prices far beyond underlying business fundamentals. Drawing on historical market bubbles and decades of financial data, Dodaro develops a quality-value framework designed to help investors distinguish genuine long-term value from speculative excitement. The approach emphasizes valuation, business quality, and disciplined decision-making over following headlines or chasing popular stocks. The book's central lesson is that market manias tend to follow recognizable patterns, creating opportunities for investors who can remain rational when the crowd becomes emotional.

Book Length: 240 pages
Release Date: September 1, 2026

Ideal For:
Long-term investors, value investors, stock pickers, and anyone interested in market bubbles, crashes, behavioral finance, valuation, and developing a more disciplined approach to investing.

“When the crowd is driven by hype, discipline becomes an investor's greatest advantage.”

DAILY VISUAL

Europe’s AI Buildout Is Missing a Financing Market

Source: Apollo

PRESENTED BY UNIQUE AI

Meet Your AI Teammates for Wealth and Asset Management

What if AI actually remembered every client, every case, every investor?

Meet Remy, Casey, and Ivy, Unique AI’s teammates for wealth and asset management.

Each is powered by perpetual memory. Remy builds a “second brain” of client context for advisors, from onboarding to proposals. Casey holds the full case history for compliance, running KYC and Source of Wealth work and flagging risk early. Ivy remembers every investor interaction, turning past RFPs and DDQs into faster, more consistent responses.

The result: grow AUM, cut admin overhead, and improve win rate, retention, and oversight, all with data governance control.

Join Unique AI on Oct 6 in NYC for the live launch with Chief Product Officer Dana Ritter and the executive leadership team. Discover what agentic AI can do across every function at your firm, and connect with peers across wealth and asset management tackling the same questions. Register now.

Who you’ll meet: Unique AI’s leadership team won’t just be on stage, they’ll be in the room. Network with them alongside senior leaders across wealth and asset management, from COOs, CTOs and Heads of AI to the advisors, compliance officers and investor relations teams who’d use these tools every day.

DAILY ACUMEN

Retail Options Trading

Say you buy call options on a stock the night before its earnings report, convinced the numbers will come in strong. The report lands exactly as you predicted. Revenue beats, guidance rises, the stock jumps several percent the next morning. You were right. Nice work!

You open your account and you are down more than half your money anyway.

That is not a hypothetical. It is the most common experience in retail options trading, and almost nobody explains why it happens before it happens to them.

The reason has nothing to do with being wrong about the stock. It has to do with what an option actually is.

The night before an announcement, nobody knows the number, so the option carries a real premium, pricing in a specific expected move. The morning after, everyone knows the number, so that premium evaporates almost instantly, regardless of which direction the stock went.

You were never really betting on the company. You were renting uncertainty for one night, and uncertainty has a price that collapses the moment it resolves, win or lose.

Being right about the news and being right about the price you paid for that bet are two completely different questions, and only one of them decides whether you make money.

ENLIGHTENMENT

Short Squeez Picks

Why you should treat your career like an athlete
Why resilient optimism beats positive thinking
How Somatics became the solution to modern life
Rich people more likely to steal children’s sweets
How the brain of a fly may help explain human behavior

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