How Does 'Undead Clarity Equity Fund' Sound To Everyone?

Author:
Publish date:
Updated on

A few months ago, Tony James suggested that we all stop using the term "private equity" because it "doesn't have as attractive a marketing name as activists," which, it must be said, is not setting the bar especially high.

Perhaps, with the extra free time he's got, he can work on an even bigger branding problem: zombie funds.

Private equity firms are sitting on $116 billion of assets trapped in so-called zombie funds that lie dormant but still rake in fees from investors, research showed on Thursday.

Almost 1,200 private equity funds can be classed as "zombie" - poor-performing funds that have been retained beyond their planned life span and whose managers have little hope of raising more money - according to data from industry tracker Preqin.

Despite the funds being inactive, general partners (GPs) - those managing the funds - still collect management fees from investors….

"No one is a winner when zombie funds are involved and represent a clear misalignment of interests between the fund manager and investor," said Ignatius Fogarty, head of Private Equity Products at Preqin.

"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," Fogarty added.

More than $100 billion trapped in 'zombie funds:' industry data [Reuters]

Related