There are around 1,200 so-called “zombie” private equity
funds where the general partners are sitting on their assets beyond the
original expected holding period with no plans to realise the investment or
raise a successor fund, according to industry figures.

Research firm Preqin unearthed the figures by examining
active firms managing a fund with a 2001-2006 vintage that have not raised a
follow-on fund after 2006.

Zombie funds have a much lower median distribution to
paid-in capital compared to their peers, with zombie funds of a 2003 vintage
distributing only 39 per cent of paid-in capital back to investors, compared to
99 per cent for all private equity funds of a 2003 vintage, the firm said.

One way to resolve the issue is buyouts of such funds,
creating an opportunity for investors to receive some return on their money.
Preqin said there are around 1,732 portfolio firms held in zombie funds, which
may open up opportunities for other private equity investors.

For example, Vision Capital is looking to acquire mature
portfolios of mid-market European companies; it closed its latest vehicle,
Vision Capital Partners VII on €680 million ($906.7 million).