Investors in private equity see a rising number of “zombie funds” tying up their money, according to a survey by secondaries asset manager Coller Capital.

Almost 50% of pension funds, insurers or other investors already have money in funds that have little hope of liquidating their assets or raising a successor vehicle, while 28% expect to see such funds appear in their portfolio, the survey found.

“Recent years, marked by inflation and high interest rates, have no doubt had an unfavorable impact on portfolio companies’ growth prospects, which could lead to an increase of zombie funds,” the report said.

Coller surveyed 110 private equity investors, also known as limited partners, in North America, Europe and Asia. The firm manages $33 billion, according to its website, making it one of the biggest investors in the secondary market, which allows investors to cash out of their private equity positions before the funds are wound up.

The findings come at a crunch moment for private equity. With higher interest rates making capital more costly for both buyers and sellers, buyout funds are struggling to get the price they want for exiting investments, while also dealing with higher financing costs for their portfolio companies.

About 64% of the surveyed limited partners also believe that at least one of the private equity managers they are currently invested with will merge with, or be acquired by, another manager in the next two years, Coller said.

The survey showed that 57% of investors are not comfortable with the use of NAV finance in the private equity industry, with one of the top concerns being the introduction of additional leverage in the system.

The sector has ramped up use of NAV financing — which allows private equity firms to borrow against a pool of their portfolio companies — as traditional borrowing options dry up. The loans are typically costly and critics warn they are likely to dilute returns later down the line.

This article was provided by Bloomberg News.