Depth/Length of an Investment Fund’s J-Curve

Nov 08

adminPrivate Equity, Venture Capital , , No Comments

The depth of an venture capitalist or private equity investor’s “J curve” is typically 3 years.   In good times (such as 1999) it can be as short as 1 year.   In bad times (such as 2002) it can be as long as 5 years…or infinite. A “J curve” is the graphical representation of the value of a portfolio of illiquid investments over time.  For example, in the first years of a venture capital firm’s new fund, they are deploying capital at cost and collecting management fees.  Therefore, until they have a reason to write up the value of their investments (follow-on funding at higher valuations) or a liquidity event, the value of their fund is lower than the capital contributed.   So, the depth or length of the “j curve” is the length of time that a funds value is less than the capital contributed.

Private Equity Funds Time Frame

Nov 06

adminLegal, Private Equity, Venture Capital , , , No Comments

Private equity funds (including venture captial funds) are typically structured to be “self-liquidating”.  This means that they dissolve at a pre-determined time, which is typically 10-12 years after its founding.  However, if the fund is not fully invested and/or liquidated by the pre-determined time, the Limited Partners generally grant an extension to the General Partners.