Tuesday, 28 June 2016
Last updated 57 min ago
Jun 14 2013 | 10:57am ET
At least $116 billion remains tied up in more than 1,000 "zombie" private-equity funds, according to a new report.
There are almost 1,200 zombie funds—those full of underperforming assets that have lived beyond their planned lifespan—according to Preqin, which looked at funds managed between 2001 and 2006 that did not see a follow-on fund raised. Such funds held shares in more than 1,700 companies and have returned less than 40% of the capital they paid in, compared to 99% for p.e. funds raised in 2003.
And while the zombie funds aren't collecting performance fees, they are still collecting management fees.
"No one is a winner when zombie funds are involved and represent a clear misalignment of interests between the fund manager and investor," Preqin's Ignatius Fogarty said. "GPs should be eager to realize investments and return capital to investors so that there is no reputational damage that adversely affects their ability to raise a follow-on fund."