Why GCC fund managers should plan for the end of a fund's life long before it arrives
Oct 30, 2026 | Written by Oliver Kirkbright
The fund that will not die
Halloween is the season for the undead, and private markets have their own version. A zombie fund is a vehicle that has outlived its intended term, still holds a meaningful portfolio, and is run by a manager that cannot raise a successor. It keeps walking: charging fees, extending its life, and returning little to the investors who backed it.
The usual warning signs are well known. Repeated extensions with little exit progress, distributions that trail peers, no follow-on fund in sight, and continuation vehicles used to park weaker assets rather than back stronger ones.
For most of the last decade, zombie funds were treated as a problem for older, Western managers. That is changing. Exits are slower everywhere, holding periods are longer, and the Gulf, for all the capital flowing into its private markets, is not exempt. The managers who come through this cycle well will be the ones who treat the end of a fund's life as a discipline to plan for, not a fate to avoid discussing.
A global outbreak
The numbers behind the trend are stark. Bain & Company's 2026 Global Private Equity Report counts roughly 32,000 unsold portfolio companies worth about US$3.8 trillion, up from 29,000 a year earlier. By mid 2026, PitchBook put the figure above 33,500.
Assets are staying in funds far longer than planned. The average buyout holding period at exit is now close to seven years, against five to six across 2010 to 2021, and distributions to LPs have stayed below 15% of net asset value for four years running. In the US alone, PitchBook data shows a record US$348.5 billion of private equity assets sitting in funds at least a decade old at the end of 2025.
Investors expect the problem to grow. In Coller Capital's Summer 2026 Global Private Capital Barometer, 54% of LPs said they expect the number of zombie funds in their portfolios to rise over the next two years; only 15% expect a fall. Two fifths also expect continuation vehicle activity to keep growing even if traditional exits recover, a sign that the tools built to manage long holds are becoming a permanent feature of the market.
Why the Gulf is not immune
On the way in, GCC private markets look healthy. PitchBook recorded US$8.6 billion of MENA private equity investment across 102 transactions in the first half of 2026, close to last year's record pace despite the disruption around the Strait of Hormuz.
The way out is a different story. PE and VC exits in the region raised just US$2.7 billion across 27 transactions in the same period, putting 2026 on course for the lowest exit value since 2017. MAGNiTT counted only 16 venture backed M&A deals in the first half, down 56% on a year earlier. PitchBook points to geopolitics, valuation gaps, AI disruption and nervous public markets as the main brakes.
The IPO route, which carried much of the region's exit activity last year, has narrowed sharply. Listings made up 8.9% of MENA private equity exit value in the first half, down from 60.8% in 2025. Post listing performance has not helped: flynas floated at a US$3.3 billion valuation and was worth around US$2.2 billion by late August, which PitchBook warns could cool appetite for future listings.
Timing adds to the pressure. The GCC's private capital industry grew quickly in the late 2010s, and a generation of funds raised in that period will reach the end of their original terms over the next few years. Many of those funds will exit on schedule. Some will need more time. A smaller number, without a clear route to liquidity or a successor fund, risk joining the walking dead.
Gulf allocators are also watching closely. Last year the Abu Dhabi Investment Council went to court to stop a US manager moving a portfolio company into a continuation vehicle, citing concerns over valuation and process. The dispute went to arbitration and was decided in the manager's favour, but it made one thing clear: regional LPs will challenge how end of life decisions are made.
The cure, and its side effects
Managers have more tools than ever to deal with an ageing fund. Term extensions buy time. Continuation vehicles let a manager move one or more assets into a new vehicle, giving existing LPs the choice to sell or roll. NAV facilities, strip sales and tender offers offer other routes to liquidity.
The secondary market that funds these solutions is reaching the region. A&O Shearman has described Middle East LPs and GPs turning to secondaries and continuation vehicles to manage longer holds and unlock earlier liquidity. In August, PGIM's Montana Capital Partners hired a head of Middle East secondary investments, based in Abu Dhabi.
Each tool can bring a fund back to life or simply prolong its afterlife. A continuation vehicle built around a strong asset with a clear value creation plan gives investors a real choice. One used to delay a write down, or to reset fees on a struggling portfolio, is exactly what LPs fear.
The rules are tightening around that distinction. On 20 October, the Institutional Limited Partners Association published its final guidance on continuation vehicles. Its draft asked managers to show why a continuation vehicle beats the alternatives, from a straight sale to an extension or NAV facility, and to give LPs enough time and information to decide.
Closer to home, Saudi Arabia's Capital Market Authority has put draft amendments out for consultation that would require private equity and venture funds to disclose each investee company, the fund's stake and its latest valuation. On every exit, funds would report the value realised and the return made. That kind of transparency makes it much harder for a fund to drift quietly past its term.
Staying among the living
For GCC managers, the lesson is not to fear the end of a fund's life but to manage it in plain sight. Five habits separate the funds that close out well from those that linger.
1. Plan the exit from the first close. Map a realistic route to liquidity for every asset, and revisit it each year as markets shift. If the IPO window narrows, know which trade buyers, sponsors or secondary buyers come next.
2. Value honestly. Marks that drift away from realistic exit prices are the first thing a secondary buyer, a regulator or an LP advisory committee will test.
3. Talk to LPs early. An extension requested a year ahead, with a clear plan, lands very differently from one requested just a few months before the term ends.
4. Choose the right tool for the right asset. A continuation vehicle suits a strong asset with more to give. A weaker asset may be better sold, even at a discount, than carried for years.
5. Build the operations to support it. Clean data, timely reporting and robust governance make every option faster and cheaper, and they reassure the investors you will need for the next fund.
Taken together, these habits protect the next fundraise. A zombie fund is, at heart, a capital raising problem: the manager cannot raise again. Managers who return capital on time, and explain clearly when they cannot, are the ones LPs back for the next vintage.
Raising the dead, together
End of life funds are becoming a more common challenge across private markets, and the Gulf's fast-growing ecosystem will meet more of them as its funds mature. How managers handle that moment, through extensions, secondaries and honest conversations with investors, will shape the region's reputation as much as any headline fundraise.
It is a theme that runs through FutureFunds 2027 on 20 and 21 January. Built for the GCC's fund management community, the event focuses on the two disciplines that keep a fund alive: capital raising and operational excellence. Liquidity and exits sit at the centre of the agenda, alongside the structures, regulation and operations that make every exit route work.
No need to board up the windows. Come outside and join the managers, operators and advisers who are building the region's next generation of funds, in one room.
Sources referenced:
• Bain & Company, Global Private Equity Report 2026, via CFO.com
• Penn Mutual AM, PitchBook unsold backlog data, Oct 2026
• Coller Capital Barometer, via Trustnet, Jun 2026
• WSJ / PitchBook on decade old funds, Jul 2026
• EnterpriseAM, MENA PE 1H 2026 (PitchBook), Sep 2026
• EnterpriseAM, MAGNiTT H1 2026 VC exits, Jul 2026
• Goodwin / FundFire on ADIC v EMG, Mar 2026
• A&O Shearman, Spotlight on the Middle East 2025
• PGIM, Middle East secondaries hire, Aug 2026
• Mercer Capital on ILPA draft CV guidance, Jul 2026