Glossary · Fund life

What is an investment period?

The investment period is the first years of a fund, often about five, when the manager can make new investments. Afterward it mostly manages and sells what it holds.

In practice

The investment period is set in the LPA and runs from the first close or initial closing date. It often ends early if a successor fund begins investing or the key-person provisions are triggered, and the LPA may allow an extension with LPAC consent. Some funds permit follow-ons and recycling afterward. It is often called the commitment period.

An example

Round numbers, not a real fund

Say a 10-year fund has a 5-year investment period. After year 5 it can still add to existing companies, but it generally cannot buy new ones.

Why it matters

It sets how long the manager can keep putting money to work, and when the fee usually steps down.

A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.

Related terms

LPAThe limited partnership agreement, or LPA, is a private fund’s main contract. It sets the fees, carry, investment limits and the rights of the manager and the investors.
Fee step-downA fee step-down lowers the management fee once the investment period ends, often by moving the fee base from committed capital to the cost of investments still held.
RecyclingRecycling lets a fund reinvest proceeds from early sales instead of distributing them, so it can invest more than investors committed, usually up to a stated limit.
Key personA key person clause lets investors pause new investments, or sometimes end the fund’s investing, if named senior people leave or stop giving the fund enough of their time.
Capital callA capital call is a notice asking investors to send part of their commitment, usually a week or two before the money is needed. It is also called a drawdown.

The terms, in the news each morning.

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