Prakash Mehta Quoted by Dow Jones on Restructuring of Private Equity Industry
Prakash Mehta, co-leader of the investment management practice at Akin Gump, was quoted in the Dow Jones story “SEC Chair: Private Equity Needs to Plan for Orderly Transitions When Funds Fail,” regarding plans by the Securities and Exchange Commission to develop recommendations to help private equity firms plan for orderly transitions if they can no longer serve their clients.
The article reports that the private equity industry does not have any laws addressing the risks that could arise when PE funds fail and need to be restructured. According to the article, it is becoming an issue of great urgency as many funds dating to the boom of the last decade are reaching the end of their lifespan, with some struggling to deliver returns to investors.
“The bubble era of private equity fundraising left in its wake a number of so-called zombie funds,” said Mehta. Such funds are typically older vehicles that continue to absorb fees and can be difficult to wind down.
Mehta continued, “The zombie fund phenomenon and other developments coming out of the financial crisis may be what’s leading the SEC to focus more on the area of fund restructurings.” That could, as noted in the article, include a change in the management of an existing portfolio.