Practical Applications of Prolonged Private Equity Holding Periods: Six Years is the New Normal

Abstract

In Prolonged Private Equity Holding Periods: Six Years is the New Normal, from the Summer 2022 issue of The Journal of Alternative Investments, authors Juha Joenväärä and Sami Torstila of Aalto University, and Juho Mäkiaho of Korona Invest examine why investment holding periods by European private equity (PE) funds have lengthened over time. They examine the period from 2000 to 2015 and find that the average holding period for investments by European PE funds increased to 5.8 years in the period following the Lehman Brothers bankruptcy from 4.7 years in the period before the bankruptcy. Additionally, the authors find that changes in market conditions cannot fully explain the lengthening of holds. They conclude that increased competition in European PE markets is a possible explanation.