The Monsters of Compliance – Zombies


I finally grabbed some pumpkins and put some garish Halloween decorations on my front lawn. My mind has become stuck on movie monsters and been mixed with compliance. This is the terrible result.

What happens when the dead won’t die? The zombie apocalypse.

Zombies in pop culture can be traced back to George Romero’s The Night of the Living Dead and the sequel, Dawn of the DeadRomero was able to make statements about race and consumerism in the context of the dead rising. (I’ll avoid the argument over whether zombies should be able to run, or merely shuffle.)

In compliance culture, the current zombies are private equity funds that won’t die. Most private equity funds are set up with a definitive end date so the investors can be sure to get their capital (or whatever remains of it) by some date in the future. Otherwise, the investment is very illiquid.

“We’re looking at zombielike funds that potentially have stale valuations.”  “The investigation into zombie funds is an important effort being driven across the country.” – In a 2012 interview of Bruce Karpati, former co-head of the SEC’s asset-management enforcement unit

Instead of achieving realizations and returning capital, the SEC is looking at a small number of funds that may be sitting on investments merely to earn investment fees. The fund should be dead but it won’t die.

It’s more likely that the fund manager can’t make the shot to the head to kill the last investments. Some of the bottom of the barrel investments may have a limited market or their business plans are taking longer to implement. Many fund managers are sympathetic to that after the economic disruption of 2008.

The danger is looking like a zombie when the shotgun wielding white hat comes into view. If you have that unhealthy pallor and look like you’ll scream “brains”, you may end up being dead instead of undead.