Barometers: Our nowcast—a real-time estimate of returns before funds officially report them—says private markets just had their best quarter since 2020. Dive into the data.

Health coverage: Our reports in the space this week address the closing GLP-1 return window, stabilization in pharma services, robust healthcare IT deal flow, and healthcare services, which we discuss more below.

Emerging tech research: Defense tech VC jumped 30-fold in a single quarter, though capital is getting ahead of factory capabilities, and Anthropic’s Mythos is rattling investors in cybersecurity.

A PE-backed company doesn’t become a zombie overnight.

Zombies move through stages, often imperceptibly, as hold periods extend, leverage remains elevated, and the window for an attractive exit narrows. What begins as a feverish asset—one showing early but manageable warning signs—can deteriorate into a full zombie or the dreaded hungry zombie if the underlying conditions are not addressed.

Zombies have always existed in PE, but never at the current scale. That’s why we created the framework below to help GPs evaluate where a PE-backed company sits on the zombie spectrum.

Each stage is defined by a combination of holding period, leverage profile, entry valuation, and specific structural features, such as payment-in-kind (PIK) interest and software sector exposure, that reflect conditions most associated with deteriorating exit prospects and value impairment.

Holding periods beyond seven years are the most concerning, but not on their own. A seven-year hold with moderate leverage and no PIK might be a high-quality asset a sponsor is intentionally keeping. A five-year hold with elevated leverage, a rich entry multiple, and PIK toggled on may already be a zombie.

The more boxes a company checks, the further a near-term, profitable exit slips out of reach.

The near-universal adoption of covenant-light loans—now 92% of outstanding leveraged loans, up from just 16% in 2009—has made this drift easier to miss. Without maintenance covenants, lenders have far fewer contractual triggers to force resolution, so a deteriorating company can keep servicing debt and avoid a technical default indefinitely.

None of this is a systemic crisis yet. PE’s closed-end structure is built to absorb stress slowly. But that just means the reckoning, if it comes, arrives later and potentially larger than the industry is currently pricing in.

For in-depth analysis on the scale of PE’s zombie overhang and what it’s all leading to, download our analyst note Private Equity’s Zombie Problem.

Private equity’s stockpile of healthcare services companies is having trouble clearing because of compounding pressures.

Higher interest rates have made debt more expensive. Tighter regulations on PE ownership of physician practices are slowing deals down. And in the first half of the year, people simply used less healthcare—fewer visits, fewer procedures—which has strategic buyers more focused on shoring up their existing operations than on acquiring new ones.

As a result, the number of healthcare services deals fell 18.5% year-over-year in Q2, continuing a slow Q1. Exits are down too: 2026 is on pace for a 26.5% drop in exit count and a 30.9% drop in exit value versus 2025.

Three of the four major segments—generalist and multispecialty providers, physician practice management companies (PPMs), and skilled care and behavioral health—saw meaningful declines. Only ancillary and outsourced services (things like clinical staffing, diagnostic labs, and ambulatory surgical centers) held close to 2025 levels.

A big driver of that soft utilization: fewer people have health insurance. Subsidies that made ACA marketplace plans affordable were cut back, and Medicaid eligibility rules got stricter. Hospital giant HCA saw this firsthand. Its CFO reported that almost all patients who lost ACA exchange coverage this year became uninsured entirely, rather than shifting to other insurance. Fewer insured patients generally means fewer non-emergency visits, procedures and elective care.

The silver lining for PPMs is that despite the near-term regulatory and macro drag, they’re positioned to benefit longer-term as AI-driven efficiencies get built into how these practices operate.