Zombie fund

An informal label for an aging or stalled fund with difficult remaining realizations and weak prospects or incentives to wind down, often with a manager unable to raise a successor fund. Age or a term extension alone does not make a fund a zombie.

Zombie fund in practice

Hypothetical: a mature fund holds assets that are difficult to exit, has limited expected carried interest and continues charging fees permitted by its governing terms. This can create a conflict between continued fee income and timely realization for investors; it does not establish improper conduct.

Source: SEC: historical discussion of private-fund incentives.

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