In 2008 the lifespan for the median fund – across sectors and geographies– was 11.5 years.
The majority, 33 percent, of private equity funds that dissolved last year took 13 to 14 years to wrap up and another 29 percent took between 11 and 12 years. Only 12 percent of liquidated private equity funds were wound up by their 10th year.
The biggest disadvantage for limited partners in funds with longer-than-expected fund lives is lower annual returns, however lack of liquidity is also a major concern, which is where the secondaries market may benefit.
“Longer fund lives should clearly feed volume into the secondaries market,” Palico spokesperson David Lanchner told Secondaries Investor. “A number of funds are being restructured and that’s directly related to longer lifespans.”
Still, Lanchner doesn’t expect fund lives to continue to increase, at least not at the same rate.
“Any future lengthening [in terms of lifespan] may not be as dramatic as we’ve seen over the last five to six years or so, though,” he said.