Private equity for beginners: The fund lifecycle

Traditional private equity funds are closed-ended vehicles with a defined lifespan, typically ten years with the possibility of extensions. Over this period, they move through three core phases: fund formation, investment, and exit. This masterclass explains how each stage works, what happens behind the scenes, and how these dynamics shape the timing of commitments and returns.

You’ll explore:

• Fund formation — where the general partner sets the investment mandate, prepares core documents such as the Private Placement Memorandum and Due Diligence Questionnaire, and raises commitments from investors. This stage establishes the fund’s strategy, governance, and expectations. It also introduces how capital commitments differ from immediate investment and why fundraising timelines vary across strategies.

• The investment period — when the GP deploys capital gradually through deal sourcing, due diligence, acquisitions, and value-creation work. You’ll learn how capital calls function, why investments are made over several years, and how operational improvements, leadership changes, and strategic initiatives all contribute to enhancing a company’s prospects.

• The exit phase — focused on realising value from the portfolio. This module outlines common exit routes such as strategic sales, secondary buyouts, IPOs, and, in some cases, dividend recapitalisations. It also explains how proceeds flow back to investors through the distribution waterfall, including the return of capital, preferred return, catch-up mechanics, and carried interest.

If you want to understand how private equity funds operate from start to finish — and how the timing and structure of each stage affect investor outcomes — this chapter provides a clear and balanced introduction.