(Bloomberg) — Buyers in non-public fairness see a rising variety of “zombie funds” tying up their cash, in accordance with a survey by secondaries asset supervisor Coller Capital.
Virtually 50% of pension funds, insurers or different traders have already got cash in funds which have little hope of liquidating their property or elevating a successor car, whereas 28% count on to see such funds seem of their portfolio, the survey discovered.
“Current years, marked by inflation and excessive rates of interest, have little doubt had an unfavorable affect on portfolio firms’ development prospects, which may result in a rise of zombie funds,” the report mentioned.
Coller surveyed 110 non-public fairness traders, also referred to as restricted companions, in North America, Europe and Asia. The agency manages $33 billion, in accordance with its web site, making it one of many greatest traders within the secondary market, which permits traders to money out of their non-public fairness positions earlier than the funds are wound up.
The findings come at a crunch second for personal fairness. With greater rates of interest making capital extra pricey for each consumers and sellers, buyout funds are struggling to get the worth they need for exiting investments, whereas additionally coping with greater financing prices for his or her portfolio firms.
About 64% of the surveyed restricted companions additionally imagine that at the very least one of many non-public fairness managers they’re at present invested with will merge with, or be acquired by, one other supervisor within the subsequent two years, Coller mentioned.
Learn extra on the rising wave of zombie funds
The survey confirmed that 57% of traders usually are not snug with using NAV finance within the non-public fairness trade, with one of many prime considerations being the introduction of further leverage within the system.
The sector has ramped up use of NAV financing — which permits non-public fairness companies to borrow in opposition to a pool of their portfolio firms — as conventional borrowing choices dry up. The loans are usually pricey and critics warn they’re prone to dilute returns later down the road.
