Fund term refers to the total lifespan of a private fund from formation to final liquidation. Most private equity and venture capital funds have a 10-year term with provisions for extensions, typically two one-year extensions at the GP's discretion and additional extensions with LP consent.
Why It Matters
The fund term determines how long you have to invest, harvest, and return capital to your investors. Structuring the term incorrectly can create serious problems. A term that is too short for the strategy may force fire sales of portfolio companies, while a term without adequate extension provisions can create conflicts with LPs who want liquidity on a predictable timeline.
Key Details
- Standard PE and VC fund term is 10 years, broken into a 3 to 5 year investment period followed by a 5 to 7 year harvest period.
- The GP typically has discretion to extend the fund by one to two years without LP approval.
- Additional extensions beyond the GP's discretion require LP majority or supermajority consent as defined in the LPA.
- Hedge funds typically have no fixed term but instead offer periodic redemption windows.
- The fund term starts at the first closing, not at the date of fund formation or the final close.
For more on how fund terms fit into the broader fund lifecycle, see Fund Formation and Structure.
Capital Company handles fund term tracking and extension administration as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.