Some PE Firms Are Doomed to Fail as Once-Hot Industry Fizzles

When Insight Partners tried to raise another $20 billion flagship fund, it found itself offering mea culpas.

Months into the campaign, the software-focused private equity firm conceded it had invested too quickly before interest rates rose, buying assets near a market peak. Executives vowed to focus on returning capital. But contrition wasn’t enough for some clients. Even after trimming ambitions to $12.5 billion to $15 billion for an era of fewer deals, the firm’s 13th fund closed in January with about $11.5 billion.

Such struggles reflect tough times for private equity.

After a half-century of meteoric growth, buyout firms are facing ...