LPs, management teams and GPs all need to maintain motivation, says Vision Capital CEO Julian Mash.
Average holding periods have increased since the onset of the crisis, with three to five years now routinely five to seven – or more. "If you think about what's gone on in 2009-2010, it's not surprising," says Julian Mash, CEO and founder of Vision Capital. "The instinct of private equity firms (since the 2008 crash) has been to help businesses recover and that's taking longer."
Longer holding periods have implications for all parties in a fund. "It is challenging for management teams because everybody was in it together at the beginning," Mash explains. The situation can often lead to decreased morale and even less GP support as they have less funding to support older acquisitions.
"And this has an extraordinary impact on limited partners," Mash stresses. "It means they have less control over where their capital is deployed because there is a build-up of legacy assets. This constrains investment decisions."
The interview goes on to suggest ways to remotivate parties involved in such situations, with direct secondaries often able to inject fresh life into investments.
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