InvestorQ : What is a "zombie fund" in investing?
Tanu Shukla made post

What is a "zombie fund" in investing?

krithika Saxena answered.
1 year ago

A zombie fund is one that still holds some or all of its assets beyond its intended holding period—usually because the fund is struggling to sell its investments for a profit. According to The Wall Street Journal, a zombie fund is “a near‐dead private‐equity fund that lingers on beyond its set life span, usually 10 to 12 years". By definition, a zombie fund’s remaining assets will generally offer little hope of returning significant, if any, profit, yet the fund may continue to charge investors unnecessary fees.

A zombie fund often results from a manager with no clear ability to raise a successor fund and a decreased incentive to maximize profit for investors. There are various types of Zombie funds, venture capital funds account for over half (54%) of all zombie funds. This compares to 21% of zombie funds which are buyout vehicles and 10% which are growth funds.