The probability that you make money (carried interest) on a search fund?
2 out of 3 search funders close on a deal, and of those that close, 73% realize a gain. Which means that less than half (~48%) make it to this stage. #privateequity #searchfund
Lower ROI outcomes are associated with shorter hold periods (per the chart), but if you assume an 8% pref and average hold of 5 years, then carried interest is earned above a 1.5x MOIC.
If you look only at outcomes in excess of 2x ROI in the chart provided (Stanford Search Fund Study 2022), then ~35% of search funds achieve a return above 2x. #searchfund #independentsponsor #SMB
Focus on outsized returns: ~5% achieve an ROI of 10x+. And if you look at the hold period for this group, 71% hold for ~10 years (longest hold period on the chart).
Conclusion: Hold great businesses for long periods of time and don't interrupt compounding. #privateequity
Source: Stanford 2022 Search Fund Study #searchfund
gsb.stanford.edu/faculty-resear…
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