Private equity professionals have toyed with the idea of raising funds with longer-than-usual lifespans and investment holding periods for years, and with a few firms already closing such funds in 2016, experts say nontraditional fund terms will become more prevalent as the industry chases higher returns on investments.
The idea of private equity funds that eschew the customary 10-year life span and five-year investment hold period has been touted by experts as a rising trend for the last few years, with the most common train of thought being that it gives fund managers the ability to create more value by having control over portfolio companies for more than a decade.
“It has become harder to find good deals because of pricing,” Howard Berkower, a partner with the corporate practice at McCarter & English LLP, told Law360. “In order to generate the kinds of returns PE historically has, [portfolio companies] may require more harvesting.”