'Hostage Funds': New Claymore Framework Names the Mechanism Trapping Billions in Aged Private Equity

New framework argues the PE industry has spent a decade treating a structural governance failure as a performance problem. Trapped capital is up 7x since 2013.

LOS ANGELES, CA, UNITED STATES, May 26, 2026 /EINPresswire.com/ -- Claymore Partners today published "Hostage Funds," a new framework that names the structural mechanism behind a growing share of private equity's trapped capital. Global AUM in aged PE funds past their natural term reached $829 billion in 2024, a sevenfold increase since 2013. The paper argues that the long-standing "zombie fund" label describes the appearance of these funds but does not explain the mechanism that creates or sustains them.

A hostage fund, the paper proposes, is one where capital cannot be freed because no single actor has both the motivation and the power to free it. Three structural thresholds must be crossed simultaneously for a fund to enter hostage condition. The General Partner's annual management fee income from continuation exceeds the realistic expected value of carried interest from resolution (the Fee Inversion). The Limited Partner governance structure cannot muster a majority to force resolution (the Governance Lock). And the asset's bid-ask spread has widened past the point where a clean exit is economically possible at current marks (the Exit Trap).

"The zombie fund label has survived for fifteen years without explaining anything," said Lee McCabe, Founder of Claymore Partners. "Everyone knows what a zombie fund looks like. Nobody has been able to do much about it. Hostage Funds names the mechanism. When three rational actors find themselves in a configuration where none has both motive and power to force resolution, the result is a structural trap rather than a behavioural failure. It calls for a materially different kind of response."

The paper documents six measurable trends underneath the framework, including the Great Elongation (median PE-backed holding periods have reached 6.4 years in 2025, up 56 percent from the 2007 baseline), the Fee-Distribution Scissors (GP management fees have held steady at roughly 2 percent of AUM while LP distributions fell to 6 percent in H1 2025 against a ten-year average of 14 percent), and the Ransom Curve (secondary market pricing falls from approximately 94 percent of NAV for funds under five years old, to 71 percent at year ten, to approximately 44 cents on the dollar by year fifteen).

"The funds that get out cleanly have one thing in common," McCabe added. "The business actually changed. Revenue moved. Margins improved. The platform thesis happened somewhere outside the board deck. The funds that stay trapped usually have a different problem. The story aged better than the asset."

The full Hostage Funds whitepaper is available for download at claymorepartners.com/perspectives.

About Claymore Partners

Claymore Partners is a digital value creation advisory working with private equity firms and their portfolio companies on operational transformation. Founded by Lee McCabe, the firm focuses on the operational levers that determine portfolio company returns: pricing, demand generation, sales effectiveness, and AI adoption. McCabe spent nearly a decade as an operating partner in private equity following senior digital leadership roles at Facebook, Alibaba, Expedia, and eBay.

Lee McCabe
Claymore Partners
lmccabe@claymorepartners.com
Visit us on social media:
LinkedIn

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.