What is the investment period?

The investment period corresponds to the period during which the manager can make tranche calls from investors to make initial investments. These years are crucial for the manager: he must undermine the best opportunities and negotiate them on favourable terms. It will probably have started this work even before the first day of subscription, but the acquisition of the holdings can only take place at the beginning of the investment period.

This period starts on the first subscription day. Indeed, from day one, the management company has an interest in investing, so as not to increase the repayment of interest too much. The sooner it invests, the sooner it will have financial returns, so distributions and soon carry.

The investment period ends on the fourth or sixth anniversary of the first day of subscription, depending on the fund’s strategy. Investors do not want this period to be spread over time. The manager must have time to reinforce each of the participations. It takes several years. In order to respect the total duration of the fund, investments must take place early so that they can be resold in time with a high added value and not at the last minute with a haircut.

The manager must make the investment period coincide with a market trend. It must be certain that its acquisitions find their momentum in a more general context: the popularity of the Web3 will have encouraged many managers to get into it, hoping that they will not arrive too late or too soon. Disseminate the investment period requires an agreement from the advisory committee, or even from the investor community. It is rare to postpone its end by more than a year. Because the management commission is based, during the investment period, on the amounts committed, and after the amounts invested, investors will be reluctant to postpone the end of this period too much.

After the end of the investment period, the manager will still be able to call the money of these investors, in particular for the management commission and the costs, but also to carry out follow-ups in the companies already acquired. Reinvesting in a company is often a key lever in a manager’s strategy. In ventures, managers often choose to increase the number of small investments, to monitor performance and strengthen themselves at the next rounds of the most promising companies. Beyond the venture, some equity may require additional investment in order not to go bankrupt: the fund must protect its holdings.

In principle, the end of the investment period of Fund I marks the beginning of the investment period of Fund II. Management teams are organising themselves and planning to ensure that activity does not collapse at the end of the investment period. They have to constantly identify opportunities and seize them, and that is their value proposition. To do so, they must anticipate the end of an investment period, so that they can be sure that they will start a new one very quickly with a new vehicle and new investors.

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