Our latest research note from PitchBook private equity analysts delves into long-dated private equity fund structures, exploring why their incidence has increased as of late in the market, and how their mechanics shift typical fund cycle paradigms.
• Long-dated funds afford managers flexibility in timing the entrance and exit of investments, as well as greater latitude to enact long-term operational improvements. From the limited partner (LP) perspective, long-dated funds generally have lower management fees, less reinvestment risk and fewer taxable events; the tradeoff, however, is greater illiquidity and key man risk.
• LPs with the longest investment horizons (such as endowments, sovereign wealth funds and family offices)
are a natural fit for long-dated PE funds. While any fund commitment warrants deep scrutiny and extensive due diligence of the manager, LPs need to place an even higher premium on these reviews when considering long-dated funds given the likelihood of a multi-decade relationship.