Private equity funds have long lives. Private equity limited partnership agreements (LPAs) typically provide for an initial 10-year term, plus two one-year extensions at the discretion of the general partner of the fund (GP). However, fund terms often stretch out for much longer, sometimes 15 to 18 to 20 or more years. This is truly a long-term commitment, for both the limited partners (LPs) and for the GP. For an overview of LPs, GPs and limited partnerships, please see my prior post "LP Corner: US Private Equity Fund Structure - The Limited Partnership."
Because funds stay around for a long time, things will change. Partners may leave the fund’s management company; the investment strategy might drift away from the initial strategy; the investment performance may be terrible to the point that the LPs want to stop the GP from investing; the fund or management firm may be embroiled in a scandal; or in rare cases, the GP may behave badly (not illegally or in violation of the LPA, but in ways that may place their personal interests above the best interests of the LPs). There are many other changes that can occur during the life of a fund.
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