USD 11.1 billion in private equity funds remain frozen in Colombia, with investors unable to sell their stakes as planned. By the end of 2025, only USD 1.6 billion of those assets had changed hands—leaving the bulk of the money locked in a market where potential purchasers are almost nonexistent. At the current exit rate, clearing the accumulated backlog would require seven more years, according to industry analyses.
The blockage stems not from a reluctance to sell, but from the absence of viable buyers. Colombia’s public equity market lacks the capacity to absorb the types of companies held by these funds. Few strategic acquirers operate locally, and the secondary market for private equity stakes is effectively nonexistent. As a result, investors are left holding illiquid assets while fund managers continue collecting management fees.
To address the issue, fund managers have increasingly sought approval from investor assemblies to extend fund lifespans. However, this solution creates new problems for investors needing liquidity. Those in closed funds cannot redeem their shares, and without a secondary market, there is no alternative for selling them. Meanwhile, managers retain their fee structures unaltered.
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The situation is not isolated to Colombia. In the United States, the world’s largest private equity market, 12% of active funds have become what are known as “zombie funds”, vehicles that remain open past their intended investment period, still holding unsold assets. These funds avoid recognizing losses or relinquishing carried interest by refusing to shut down, instead prolonging their operations indefinitely.
A growing number of funds are turning to continuation funds as a potential solution. When a fund nears its original deadline, unsold assets are transferred into a new vehicle. Investors are then given a choice: withdraw their capital from the sale proceeds or reinvest it in the continuation fund, with the promise of potentially higher future returns. The trade-off is straightforward, immediate liquidity or a gamble on long-term appreciation.
This strategy carries inherent risks. Fund managers, who act as both sellers and buyers in the process, face conflicts of interest. Regulators must carefully examine whether the terms of these transactions benefit investors or primarily serve the fund’s management. Despite these concerns, continuation funds could help accelerate exits in markets where illiquidity remains the most pressing obstacle, potentially drawing in foreign investment.
