Unwinding the Knot: How to Strategically Wind Down Illiquid Private Funds

Wind-downs are among the most complex phases in a fund’s life. Illiquid assets, lack of GP engagement, and misaligned incentives can result in “zombie funds”. These are vehicles that continue to exist with minimal progress toward realisation.

A strategic wind-down begins with a thorough diagnostic of the portfolio. Each remaining position must be assessed, an exit path determined together with an estimate of value recovery and the likely timeline to achieve it.   Independent valuation specialists can be instrumental in providing fresh perspectives and enhanced scrutiny, particularly when the incumbent GP is disengaged.

Next, the wind-down strategy must be established: Should assets be sold piecemeal or as a portfolio? Are there strategic buyers or secondary players willing to acquire difficult assets? What regulatory approvals or fund-level consents are required?

Managers of stalled private equity funds often prioritise raising new funds over selling old investments. Their motivations can conflict – they focus on preserving management fees while avoiding difficult resource-heavy asset sales, especially when carried interest becomes unattainable (e.g. the thresholds become permanently unreachable). In such cases, Cork Gully can bring dedicated wind-down expertise. We conduct an initial review, create a step-by-step exit roadmap, and manage the full lifecycle of disposals.

Wind-downs also demand transparency. LPs must be kept informed about costs, timelines, and risks. A well-managed process includes frequent reporting, clear performance targets, and open lines of communication with all stakeholders.

Timing is another key consideration. Delaying the wind-down in hopes of market improvement often backfires. Costs accumulate, oversight diminishes, and asset quality deteriorates. Acting decisively usually yields better results.

Cork Gully’s tailored approach focuses on: