New York (HedgeCo.Net) $7.3 billion hedge fund secondary buyer Crestline Investors Inc, and merchant banker Kirchner Group have joined forces to launch a joint venture with the aim of buying up so-called zombie funds from their original private equity sponsors, according to a Reuters report.
The new team, called The Crestline-Kirchner Private Equity Group, has plans to buy and then invest in underperforming hedge funds.
“The universe of U.S. zombie funds – poor-performing private equity funds whose managers have little hope of raising more money – measures about $100 billion in assets.” According to industry estimates cited by the two firms.
W.B. (Bud) Kirchner and Dave Philipp, head of asset management for Kirchner Group will be running the new group.
“This is for us an ongoing business model,” Paul Choy, managing director of Kirchner Group said in an interviw with Reuters. “We replace or complement the GP in underperforming funds, turn them around on behalf of the LPs, accelerate return of capital, and recover value within the portfolio. With the joint venture with the Crestline Investors, we are accelerating and expanding that program.”
Crestline Investors currently has $1.9 billion allocated for “opportunistic investments” which the Crestline-Kirchner Private Equity Group will tap into.
The New York Times reported in 2012 that four years after the onset of the financial crisis, tens of billions of dollars remain locked up in illiquid “zombie” hedge funds that suspended their redemptions in the darkest days of the meltdown.
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