These zombie stories just won’t die.

Last week Kirchner Group and Crestline Partners announced a joint effort to give limited partners (LPs) liquidity:

There is an estimated $100 billion in private equity assets managed by funds past their investment periods, according to industry estimates. Many of these so-called “zombie funds” have serious issues of alignment between the general partner and limited partners. As a result, an increasing number of institutional investors are looking for creative and effective ways to restructure these funds and rationalize their private equity portfolios.

Meet the Bobs of Private Equity

The announcement goes on to explain its areas of focus, which include supporting or replacing general partners, managing or even restructuring troubled funds, providing portfolio follow-on capital and even company level follow-on investment, and finding other opportunities for exits to give LPs liquidity and maximize value.

According to PEhub Kirchner Group has already has some success with this model:

Kirchner Group has made a name for itself as a specialist in zombie deals. It took over management of the Brantley Partners V LP from Brantley Partners and renamed it Emerald Partners V LP fund, which it continues to run.

What’s In Store for Venture Capital?

VC investing is a subcategory of private equity, accounting for $30B invested by venture capitalists in portfolio companies in 2012, according to the North American Venture Capital Association. This is roughly 10% of the private equity industry’s annual global investment, so I suspect the lowest hanging fruit for this kind of restructuring are among huge private equity firms but I certainly wouldn’t rule out some restructuring of larger zombie VC funds.

We are at the beginning of an industry transformation for traditional venture capital that has been a long time coming, and the chronicling of this shift began with the May 2012 report from the Kauffman Foundation, one of the largest investors in venture capital firms and an entrepreneurship think tank, on venture capital as an asset class. According to their findings:

Venture capital (VC) has delivered poor returns for more than a decade. VC returns haven’t significantly outperformed the public market since the late 1990s, and, since 1997, less cash has been returned to investors than has been invested in VC. Speculation among industry insiders is that the VC model is broken, despite occasional high-profile successes like Groupon, Zynga, LinkedIn, and Facebook in recent years.

You can read the full report here.

We will be watching to see which LPs take this route to liquidity for their venture capital portfolio, and looking to determine what those restructuring deals and partnership changes could mean for the entrepreneurs within their portfolio companies.