Term (Fund Life)
Term is the expected life of a fund, including investment period and harvest period, often with extension options.
Definition
A fund term defines the duration over which the fund operates before liquidation. It typically includes an initial term (e.g., 10 years) plus extension options at the GP’s discretion with LP or advisory approval. Term affects liquidity, distribution timing, and portfolio planning. Allocator Context Allocators evaluate term in relation to strategy and underlying asset duration. Long terms are standard in private equity and venture. Extensions are common, but frequent extensions can create liquidity drag and governance concerns. Decision Authority Term and extensions are governed by fund documents and overseen by LP advisory structures and committees. Some allocators require additional approvals for funds with unusually long terms or flexible extension rights. Why It Matters for Fundraising Managers should communicate how long capital is realistically locked up and what conditions lead to extensions. LPs plan portfolios around term assumptions. Key Takeaways Sets the duration of illiquidity Extensions change LP liquidity planning Term must match strategy duration Transparency supports trust and re-ups