Term: Zombie fund

Industry jargon for a fund that is well into its lifecycle – perhaps in its 12th 13th or 14th year – where performance has been weak enough that there is little chance of raising another fund and where a number of portfolio companies have yet to be exited. The fund staggers on like a zombie in part because the GPs managing it have a perverse incentive to keep it going so they can collect fees and protect their upside optionality. As in: I know an LP who woefully estimates that one in three GPs in his portfolio is a zombie fund. He’s talking to a lot of secondaries buyers.

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