Private equity is sitting on a pile of assets it can't sell, and the usual explanation, that exits are slow because the market is soft, is missing the mechanism. The deeper reason is an accounting one, and it’s hiding in plain sight on every fund's marks. Gary Crittenden, the former Citigroup CFO who lived through true mark-to-market discipline on the public side, names it in plain English: the liquidity discount that a public company is forced to reflect simply isn't in most private equity marks. Until it is, the assets stay frozen. Here’s why, and what actually thaws the log jam.
The problem is the mark
The companies aren't necessarily broken. The marks are. "That liquidity discount is not reflected typically in a private equity mark," Crittenden says on a recent episode of Carried Interest. "As a result, the assets can't trade because people are thinking that the true valuation is up here when in reality it's down here."
That gap between the carried value and the price a buyer would actually pay is what jams the market. A seller anchored to an optimistic mark won't accept the clearing price, and a buyer won't pay the mark. As a result, nothing trades. The slowdown everyone attributes to soft conditions is, underneath, a refusal to write assets down to where they would actually change hands. Performance is a side issue when the price tag itself is the obstacle.
What a public company must do that a PE fund doesn't
The contrast with public markets is the spine of the problem. A public company's stock is marked to market every second the exchange is open, and that price already bakes in a liquidity discount. The market prices in how hard it would be to sell at scale. A private equity fund faces no such mechanism. "There's no regulatory reason why people have to mark things at what would truly be a market clearing price," Crittenden says.
So the same business, held publicly, would carry a lower, liquidity-adjusted value, while held privately it can sit at a mark that assumes a frictionless sale that isn't available. That’s the absence of a forcing function. It means private marks drift above clearing prices, and the longer they drift, the harder the eventual reckoning.
Why the old "ring around the roses" stopped working
For years, frozen assets had an escape valve: sell from one GP to another, financed by cheap private debt. That mechanism has seized up. "The private debt market has got issues," Crittenden says, the kind that "that ring around the roses kind of thing that existed in the past was dependent on being able to originate new private debt to do that acquisition."
When the financing that funded GP-to-GP sales dries up, the most common exit for a stuck asset disappears with it. The buyer who would have taken the company off another sponsor's hands can no longer borrow to do it at the old terms. So an exit route that cleared a lot of inventory is no longer there, which leaves the over-marked asset sitting exactly where it was.
The carry trap of holding too long
There is an incentive wrinkle that makes the freeze worse. Holding an asset longer doesn't just delay a return; it erodes the economics for the GP. "Carry is a function of your return," Crittenden says, "and if the company is staying the same and you're just holding on to it, even though profitability is coming through each year into the company, your carry is going down significantly."
A flat company held for extra years drags the return profile down, and because carry is calculated off returns, the GP's own upside shrinks the longer the asset sits. That creates a painful bind: writing the mark down to clear the asset is unpleasant now, but holding it at an inflated mark gradually bleeds the carry anyway. Either way the cost is real, and only one of them frees up capital.
"Carry is a function of your return. And and if the company is staying the same and you're just holding on to it, even though profitability is coming through each year into the company, your carry is going down significantly." — Gary Crittenden
What actually clears the log jam
The honest path out is to mark assets to where they would actually trade, even before any regulation forces it. Marking honestly restores the bid-ask overlap, lets assets change hands, and returns capital to LPs, which is the thing that re-enables fresh commitments. Crittenden's read is that a regulatory mark-to-market discipline may eventually arrive, but firms don't have to wait for it. The ones that mark realistically now restore their own liquidity and their LPs' willingness to re-up, while the ones holding inflated marks stay frozen.
A 2026-forward caveat is worth stating: this is not a 2008 rerun. The private-credit stress is narrower and more diversified than the mortgage crisis was, so the systemic risk is lower. But narrower stress still removes a funding source PE leaned on, which is why the log jam persists even without a broad financial crisis.
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Frequently asked questions
Why can't private equity firms sell their portfolio companies right now?
Often because the assets are marked above the price a buyer would actually pay. Private equity marks typically don't include the liquidity discount that public-market prices do, so the carried value sits above the clearing price. Sellers anchor to the optimistic mark and buyers won't meet it, so the assets don't trade. The slowdown is as much an accounting issue as a performance one.
What is the liquidity discount missing from PE marks?
It's the reduction in value that reflects how hard an asset is to sell quickly at scale. Public companies have this discount priced in continuously by the market. Private equity funds face no regulatory requirement to mark to a true clearing price, so their marks can omit the discount and drift above what a buyer would pay.
Why did GP-to-GP secondary sales slow down?
Because they depended on cheap private debt to finance the purchase. As the private-credit market tightened, the buyer who would have acquired a company from another sponsor could no longer borrow on the old terms. That removed a common exit route for stuck assets, leaving over-marked companies with fewer ways to trade.
How does holding an asset too long hurt a GP's carry?
Carry is a function of returns. A company held flat for extra years drags the return profile down, and since carry is calculated off returns, the GP's own upside shrinks the longer the asset sits, even as the company keeps generating profit. Holding an inflated mark to avoid a write-down quietly erodes the carry anyway.
What would actually clear the private equity log jam?
Marking assets honestly to where they would trade, rather than waiting for regulation to force it. Realistic marks restore the overlap between buyers and sellers, let assets change hands, and return capital to LPs, which re-enables fresh commitments. Firms that mark realistically now restore their own liquidity; those holding inflated marks stay frozen.
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