Unlike evergreen mutual funds, most Alternative Investment Funds have a finite life, typically lasting between 7 to 10 years. This is known as the “fund term.” But what happens when the fund reaches the end of this period? This phase is known as the ‘harvesting’ or ‘exit’ period.
During the final years of the fund, the manager’s focus shifts from making new investments to strategically selling the existing assets. For a private equity fund, this means selling its stake in portfolio companies through an IPO, a strategic sale to another company, or a sale to another investor. The proceeds from these exits are then distributed back to the investors, ideally returning their original capital plus a significant profit. This marks the successful completion of the fund’s lifecycle.
