Private equity dealmakers are leaving because the money stopped working
A junior dealmaker at a private equity buyout shop went into the fall of 2024 holding roughly $1.8 million in accrued carried interest. That figure is real, on paper, tied to assets the firm bought between 2019 and 2021. It is also unavailable. The companies haven't sold. The carry hasn't vested. The payout she was promised when she joined in 2019 now sits in a holding pattern with no clear release date, and by October she had moved to a private credit fund at a guaranteed salary 40% higher than her base at the PE firm.
Carried interest, the share of deal profits that makes private equity lucrative for the people who structure the transactions, has collapsed as a meaningful income source across the industry. Assets aren't moving because companies aren't selling. In 2021, global PE exit value peaked near $1.7 trillion. By the end of 2024, exit activity had contracted sharply from 2021 peaks, with global PE exit value estimated between $120 billion and $896 billion depending on the tracker and inclusion criteria. Fewer sales mean no distributions. No distributions mean no carry. The model that minted millionaires in their thirties has stalled, and the talent is walking.
The high-rate trap
The arithmetic is mechanical. Private equity's golden decade ran on cheap debt. Firms would buy a mid-market business, lever it 5-to-1, hold for four years, sell into a rising valuation environment, and split the profit. That loop required two conditions: borrowing costs under 3%, and an exit market willing to pay a premium. Both conditions vanished in 2022. Interest rates across North America rose sharply through 2022 and 2023. Borrowing a dollar to buy a company now costs roughly double what it cost in 2020, which compresses the return on every leveraged transaction. Meanwhile, buyers for those same companies have thinned. Strategic acquirers are cautious. Public markets are closed to anything but the largest exits. The secondary market, where one PE fund sells a company to another, has cooled.
Firms responded by not selling. They held. In some cases, they used "continuation funds," moving an asset from one of their own funds into a newer one to buy time, a maneuver that lets them extend the hold period without technically admitting failure. Investors hate it. The Institutional Limited Partners Association, which represents pension funds and endowments, published a 2024 report noting that many LPs are now demanding return of capital before committing to new funds. AIMCo, which manages over $160 billion for Alberta's public sector pensions, publicly flagged private equity "over-allocation" as a portfolio concern in its 2024 annual report. The subtext: PE has not returned enough cash to rebalance.
The exodus to credit
Dealmakers are leaving to move to adjacent industries where payouts are shorter and more predictable. Private credit, lending directly to companies rather than buying equity, is the primary destination. Credit funds have boomed as traditional bank lending contracted. They charge upfront fees and earn interest income quarterly, which flows to managers faster than the multi-year hold periods PE requires. A mid-level credit associate in Calgary can expect to see performance fees within 18 months, compared to five years in traditional PE.
The shift is generational. The partners who built the firms in the 2000s are staying. Their carry from earlier vintages already vested. The 28-to-38 cohort, hired into the 2017, 2021 boom on the promise of paper wealth by 35, is the one facing a decade-long wait with no guarantee the exit environment improves.
Edmonton and Calgary remain insulated in one narrow corridor: energy services and decarbonization. Specialized PE focused on emissions-reduction projects or natural gas pipelines and production still attracts patient capital, but those funds operate on longer timelines by design.
The broader industry has no such hedge. The easy money from financial engineering is over. What replaces it, operational improvement, actual business-building, requires skills the last decade did not select for.
A junior dealmaker at a private equity buyout shop went into the fall of 2024 holding roughly $1.8 million in accrued carried interest. That figure is real, on paper, tied to assets the firm bought between 2019 and 2021. It is also unavailable. The companies haven't sold. The carry hasn't vested. The payout she was promised when she joined in 2019 now sits in a holding pattern with no clear release date, and by October she had moved to a private credit fund at a guaranteed salary 40% higher than her base at the PE firm.
Carried interest, the share of deal profits that makes private equity lucrative for the people who structure the transactions, has collapsed as a meaningful income source across the industry. Assets aren't moving because companies aren't selling. In 2021, global PE exit value peaked near $1.7 trillion. By the end of 2024, exit activity had contracted sharply from 2021 peaks, with global PE exit value estimated between $120 billion and $896 billion depending on the tracker and inclusion criteria. Fewer sales mean no distributions. No distributions mean no carry. The model that minted millionaires in their thirties has stalled, and the talent is walking.
The high-rate trap
The arithmetic is mechanical. Private equity's golden decade ran on cheap debt. Firms would buy a mid-market business, lever it 5-to-1, hold for four years, sell into a rising valuation environment, and split the profit. That loop required two conditions: borrowing costs under 3%, and an exit market willing to pay a premium. Both conditions vanished in 2022. Interest rates across North America rose sharply through 2022 and 2023. Borrowing a dollar to buy a company now costs roughly double what it cost in 2020, which compresses the return on every leveraged transaction. Meanwhile, buyers for those same companies have thinned. Strategic acquirers are cautious. Public markets are closed to anything but the largest exits. The secondary market, where one PE fund sells a company to another, has cooled.
Firms responded by not selling. They held. In some cases, they used "continuation funds," moving an asset from one of their own funds into a newer one to buy time, a maneuver that lets them extend the hold period without technically admitting failure. Investors hate it. The Institutional Limited Partners Association, which represents pension funds and endowments, published a 2024 report noting that many LPs are now demanding return of capital before committing to new funds. AIMCo, which manages over $160 billion for Alberta's public sector pensions, publicly flagged private equity "over-allocation" as a portfolio concern in its 2024 annual report. The subtext: PE has not returned enough cash to rebalance.
The exodus to credit
Dealmakers are leaving to move to adjacent industries where payouts are shorter and more predictable. Private credit, lending directly to companies rather than buying equity, is the primary destination. Credit funds have boomed as traditional bank lending contracted. They charge upfront fees and earn interest income quarterly, which flows to managers faster than the multi-year hold periods PE requires. A mid-level credit associate in Calgary can expect to see performance fees within 18 months, compared to five years in traditional PE.
The shift is generational. The partners who built the firms in the 2000s are staying. Their carry from earlier vintages already vested. The 28-to-38 cohort, hired into the 2017, 2021 boom on the promise of paper wealth by 35, is the one facing a decade-long wait with no guarantee the exit environment improves.
Edmonton and Calgary remain insulated in one narrow corridor: energy services and decarbonization. Specialized PE focused on emissions-reduction projects or natural gas pipelines and production still attracts patient capital, but those funds operate on longer timelines by design.
The broader industry has no such hedge. The easy money from financial engineering is over. What replaces it, operational improvement, actual business-building, requires skills the last decade did not select for.
Sources
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