Private Equity Hold Period

Last updated: March 22, 2024

What Does Private Equity Hold Period Mean?

Private equity hold period is the time frame in which private equity firms hold on to portfolio companies.


Divestopedia Explains Private Equity Hold Period

Private equity hold periods typical for a buyout investment is five to seven years in an active deal market. During the hold period, the fund manager aims to turn a large profit for investors by increasing the portfolio value.

Private equity firms prefer shorter hold times, which exist in a booming exit market as the rate of return is much higher. Aging investments are less desirable as they lower the rate of return due to discounts on the cash flow. In addition, holding investments past the target period makes it harder to raise new funds as a result of fewer investments exiting the market. Generally, companies valued in the millions of dollars have an average holding period of five to six years, while those valued in the billions have a holding period of seven years or more.


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