Closed-End Fund
A closed-end fund is a fund with a fixed fundraising period and term, where capital is committed up front and called over time, with limited liquidity until distributions.
Allocator relevance: Closed-end terms define liquidity mismatch and pacing—allocators must plan commitments, cash flows, and re-ups across vintages.
Expanded Definition
Closed-end funds are the standard structure for private equity and venture. LPs make commitments during fundraising, the GP calls capital during the investment period, and returns are realized through exits and distributed according to the waterfall. Investors typically cannot redeem on demand, so liquidity depends on the fund lifecycle and secondary market options.
Closed-end structure forces allocators to manage cash-flow modeling: expected drawdowns, DPI timing, and exposure by vintage.
Decision Authority & Governance
Governance is anchored in the LPA: investment period, extensions, key person clauses, recycling limits, and LPAC oversight. Decision authority constraints often include how and when the GP can extend the term or raise successor funds.
Common Misconceptions
- Closed-end means “safer” because it’s standard.
- Illiquidity guarantees higher returns.
- You can model cash flows precisely (they’re probabilistic).
Key Takeaways
- Closed-end funds require commitment pacing discipline.
- Liquidity is driven by exits and distributions, not NAV.
- Governance terms (extensions, recycling) matter materially.