Night of the Living Zombie PE Funds
Asset allocation to private equity and other alternatives has increased tremendously in the past decade. Investors struggle to deal with legacy private equity partnerships. Many public investors have private equity funds in their portfolio that perform in the bottom quartile. These funds have a very slim chance of generating a profit, but still feed on the financial resources of investors. It also ties up asset allocation. These “zombie funds” charge management fees until their lives expire. This is a raw deal for public investors whose returns are lessened by longer holding periods and drawn out management fees. In the end, the zombie funds must be properly put to rest or face the wrath of frustrated limited partners.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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