Understanding Closed-Ended Fund Lifecycle

Private equity and venture capital funds operate on a carefully structured timeline, but without the right expertise, critical steps like equalization, capital calls, and carry calculations can become costly hurdles.

In this guide, we break down the four key phases of a closed-end fund’s lifecycle from initial fundraising to final distributions, and explain how managers can optimize operations, compliance, and investor transparency at each stage.

Whether you're launching a new fund or scaling an existing one, understanding these mechanics is key to maximizing returns and minimizing operational friction.

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Fund raising period – typically 1 to 2 years. (Year 0 to 2) 

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During this period, the Fund is open to accepting of new investors. The first round of acceptance is called the First Closing, with each subsequent round called Subsequent Closing. A Final Close will occur at the end of the Fund raising period. If extension is required for Fund raising, typically this exercise will require the approval of the investors.  

During each closing, an Equalisation (or rebalancing) exercise will be performed. This allows all investors to be trued-up, as if they had joined the Fund during the First Closing.  

As part of the Equalisation exercise, new investors are required to fund their allocated portion in their first capital call: 

1. Capital Call for Investment and Fund expenses (based on their % of commitment against the Fund) – this amount will be repaid to earlier investors 

2. Equalisation interest for (1) – to pay earlier investors who have “previously funded” their portion of the Investment and Fund expenses 

3. Inception to date management fee payable to the Fund Manager 

4. Late interest for management fee – payable to Fund Manager (as they are deemed to have joined the Fund during the First Closing) 

Subsequent investors are typically required to pay the above interest payments [(2) and (4) above] as they have the benefit of assessing the Fund’s existing portfolio and performance prior to participating. However, such terms are not mandatory, and can be excluded in the Fund governing documents. 

Investment period – typically 5 years. (Year 0 to 5)  

Investment period typically runs concurrently with the Fund raising period. During this period, the Fund will be able to invest in new investments. The investible amount of the Fund’s is approximately 75%~80% of the Fund’s total commitment (remaining 20~25% to cater for management fee, and Fund operating expenses)  

During this period, management fees are typically charged based on Fund commitment. 

Portfolio management and Divestment period – typically 5 years. (Year 6 to 10) 

During this period, the Fund will no longer be able to invest in new investments. However, the Fund can continue to follow on investing in existing investments. This is the period the Company will be looking for the best exit plan for its existing investments. 

Management fees during this period are typically charged either: 

1. On a lower percentage compared to during the investment period; or 

2. A different computation methodology such as lower of cost or fair value. 

The objective of this period is to divest all investment holdings, distribute all proceeds (including Carry Interest) and winding down of the Fund. Computation and assurance testing of the Carried Interest model may be carried out during this phase, before any actual realisation of Carry Interest.  

Extension period – typically maximum extension period of two years 

A Fund typically allows extension of its fund life for up to two years (one year per extension): 

1. First extension typically require approval from the GP/Director of the Fund; 

2. Second extension typically require approval from the Investors. 

During the first extension of the Fund life, management fee may be reduced, while there are typically no management fee charged from the second extension onwards.  

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How Kai Global Consulting can help

Kai Global Consulting provides end-to-end operational support for closed-ended funds, ensuring accuracy, speed and precision at every lifecycle stage.

Our Expertise:

✔ Investor Onboarding – Smooth onboarding for investors at every closing

✔ Precision Capital Calls – Accurate calculations and seamless execution

✔ Fee & Carry Management – Transparent calculations from commitment to exit

✔ Lifecycle Compliance – Keep your fund on track through all phases

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