zombies

PE Exposure to Zombie Funds Could Be Growing

by

July 2, 2012

There is a growing number of pension funds and other large LPs with exposure to near-dead or “zombie” funds, according to an article published in the WSJ. The value of deals in this market has grown to an estimated USD30 billion from USD3 billion in 2002, according to advisory firm Triago.

 

The article explains that zombie fund are like the name suggests, they are funds that persist over a contracted “life span” of 10 to 12 years, forcing LPs to continue to pay management fees, even though the assets offer little hope of returning a decent profit.

 

The WSJ report says that as much as USD100 billion of the USD1.5 trillion currently invested in private equity is exposed to zombies, citing “industry estimates” and it could grow to USD500 billion over the next several years, according to Triago.

 

The article discusses the rumor that California Public Employee Retirement fund is selling in the secondary market USD200 million in zombie funds that hold venture-capital investments in start-ups, as a recent example.

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