What is a fund extension?

Closed-end funds typically run 8 to 12 years, and almost all allow extensions; documents typically provide for two one-year extensions, and three is more common in infrastructure and venture funds. ILPA’s Principles 3.0 say extensions should come one year at a time, two at most, approved by the LPAC and then a supermajority of LPs, with no fees after the original term.

Say a fund has a 10-year term and allows two one-year extensions. If companies remain unsold in year 10, it can run to the end of year 12 before it must wind up. Simple example. Terms vary by fund.

An extension delays when investors get their money back, and whether fees continue during it is something LPs negotiate.