Private equity funds that make long-term investments of between 15-20 years have less chance of attracting investors than shorter-term funds despite having lower fees, a survey indicates.
Nearly three quarters of 142 private equity professionals surveyed did not expect to see“long-life”private equity fund structures gain in popularity over the next five years.
However, a number of respondents to the Intertrust survey did say lower management fees would help long-life private equity funds, as would their greater flexibility to invest in companies for longer periods to improve returns.
Over a third of investors surveyed expected to see short-dated funds grow in popularity.
Important to more than half of the survey participants considering investing in a long-life fund would be the existing success in long-life funds.
Paul Lawrence, global head of funds at Intertrust, which is a fund services provider, said: “A maturing industry is resulting in more experimentation with fund structures. Short-term funds are popular among new managers attracting LPs who are cautious of locking up their capital for a decade or more in an untested strategy.”
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