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This isn't actually strict. There are funds that don't cash out. They are called "evergreen" funds, and are rare but do exist. Part of the issue is that funds
by joshu 16y ago
This isn't actually strict. There are funds that don't cash out. They are called "evergreen" funds, and are rare but do exist.
Part of the issue is that funds are judged and compared by their IRR.
I'm an LP in eight funds. I don't care about IRR, just absolute return, and would love to see more evergreen funds.
Finally, some of the funds that I am in do recycle returns if the return was under some multiplier. Anything under, say, 1.5x does not go back to the investor.
- robk 16y agoYep - it's more common to see a multiple for recycling in the sense you can recycle money 1.25x, after which the money goes back to the investor. This is generally done to provide liquidity to investors. Many investors prefer liquidity, nothing more or less.
- danshapiro 16y agoThanks, that's great info! One of the funds (arguably two or three, depending on definitions) in my last company was structured as an evergreen fund. It's a good model, but tends to be common in funds that only have one LP.