The Pulse of Private Equity – 6/11/2018

The pros and cons of long-dated funds

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Private equity moves at a glacial pace. While the average shelf life of a PE fund is often assumed to be eight to ten years, many funds require considerably more time to wind down. PitchBook data shows that it takes between 11 to 14 years for a PE fund to reach an RVPI of less than 0.5. Another slice of data to consider: 53% of 2004-vintage buyout funds remain active to this day. For perspective, Friends was still on the air and Lance Armstrong was still winning Tours de France in 2004. If that seems like a long time, expect to see more cases of this going forward. So-called long-dated funds are starting to proliferate, with clear intentions of lasting 15 years or longer. Over the past two years, more established buyout shops like Carlyle, Blackstone and Apollo have gravitated toward the strategy for a number of reasons. In our latest analyst note, we lay out the pros and cons of the strategy as well as the likely consequences of investing in them.