# Private equity is stuck until firms can exit investments

Markdown copy of https://realalpha.app/s/private-equity-is-stuck-until-firms-can-exit-investments/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Andrew Ross Sorkin](https://realalpha.app/people/andrew-ross-sorkin/) · Andrew Ross Sorkin is editor-at-large of DealBook at The New York Times and co-anchor of CNBC’s Squawk Box. · Founded DealBook and co-anchors CNBC’s Squawk Box; wrote the bestselling books 1929 and Too Big to Fail.
- Host: [Scott Galloway](https://realalpha.app/people/scott-galloway/)
- Host: [Ed Elson](https://realalpha.app/people/ed-elson/)
- Show: Prof G Markets
- Episode: [LA Fires, Trump Trades, TikTok, and Legacy Media’s Fate — ft. Andrew Ross Sorkin | Prof G Markets](https://realalpha.app/v/t3WiXCtS-9A/), Jan 16, 2025
- Moment: 28:10 to 32:05 of the episode (4 min), playing on https://realalpha.app/s/private-equity-is-stuck-until-firms-can-exit-investments/; the episode from there: https://realalpha.app/v/t3WiXCtS-9A/?t=1690

## Quote

> “Every year you're marking up these investments as if they're worth more, but **you haven't exited**.”
> — [Andrew Ross Sorkin](https://realalpha.app/people/andrew-ross-sorkin/) at [29:08](https://realalpha.app/v/t3WiXCtS-9A/?t=1748) · Prof G Markets

## Takeaways

1. Investors say their capital is still tied up in old funds.
2. Private assets can be marked up without a market exit.
3. Selling at lower multiples may be necessary to restart fundraising.

## About this segment

Andrew Ross Sorkin says private equity firms can’t raise fresh capital while pensions and sovereign funds wait for exits. Rising paper valuations don’t solve the cash-flow problem.

From “LA Fires, Trump Trades, TikTok, and Legacy Media’s Fate — ft. Andrew Ross Sorkin | Prof G Markets”, Jan 16, 2025. [Watch the full episode](https://realalpha.app/v/t3WiXCtS-9A/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[28:22](https://realalpha.app/v/t3WiXCtS-9A/?t=1702) I mean, 90% of active managers have underperformed their respective indices. The way I would describe the alternative investments sector right now is expensive but bad. Do you think there's a shakeout coming or do you think this is we're about to enter an era of stock picking again? Like talk about your industry, not media, but the alternative investments ecosystem. What do you see coming down the pike?

[28:46](https://realalpha.app/v/t3WiXCtS-9A/?t=1726) OK, well, so right now, the alternative investment ecosystem and particularly private equity, you could argue, is actually broken. There have been so few exits in the private equity space right now that actually most U.S. pension funds have no cash to give. It's actually a very interesting phenomenon. So all of these private equity firms are running around the country trying to raise money from various pension funds.

[29:12](https://realalpha.app/v/t3WiXCtS-9A/?t=1752) And they're all saying, you guys haven't had exits in years. We don't have cash to hand you because you still have our cash. Every year you're marking up these investments as if they're worth more, but you haven't exited. And so then, as you know, over the past couple of years, in part because the U.S. was tapped out, all these guys ran to the Middle East and started trying to raise money in Saudi and everyone else.

[29:38](https://realalpha.app/v/t3WiXCtS-9A/?t=1778) Well, guess what's happened over there? All of a sudden they're saying to themselves, you know, we got to start investing in Saudi and in the Middle East ourselves. So actually, we're going to get a little tapped out, too. So unless there is a break in the market in a good way, meaning things have to break the right way for there to be a series of exits so that a lot of the sort of VC private equity world, which has been holding onto these assets, writing them these assets up, up, up, up, up, up, up with these valuations that may be real, but may be marked to make believe, depending on who you believe.

[30:23](https://realalpha.app/v/t3WiXCtS-9A/?t=1823) If it works, they'll get out and maybe this whole thing can work again. At the moment, we're like in a little bit of like almost like a stuck moment. Why do you think that is? Is that a regulatory issue? What argument would they make as to why we haven't seen so many exits in the past few years? I think there's a combination of things going on. One is in venture capital, something changed. And I can't put my finger on specifically what it is, but just the duration, the whole time for venture capital investments has shifted materially.

[30:53](https://realalpha.app/v/t3WiXCtS-9A/?t=1853) People have said they almost want to enjoy the ride longer, and I think you saw it like Stripe is a good example of that. But there were so many companies where I think you saw them stay private for longer, and that has sort of changed the mindset. On the private equity side, I think it's literally that they have not found these markets hospitable to actually be able to get out of these investments at the kind of multiples they want over the last couple of years.

[31:21](https://realalpha.app/v/t3WiXCtS-9A/?t=1881) And as a result, their view is let's not sell. Now, one of the things that they often talk about, and they're not wrong, but it's really a little bit of semantics, they say, you know, private equity is a lot less volatile than the public markets. Well, it's a lot less volatile than the public markets because you don't look at the price every day. So at some point, the rubber is going to meet the road.

[31:43](https://realalpha.app/v/t3WiXCtS-9A/?t=1903) And we'll see, you know, do the valuations with which they've been holding these assets actually correlate to the quote unquote market in the context of the public market?