An Investor’s Guide to Search Funds

Abstract

The predominance of search fund research is focused on the mechanics of selection or the post mortem analysis of results. Our study seeks to expand on the evaluation of search funds and their role within an investment portfolio from an investor’s perspective.

We review the background of search fund investing and then present a model for self-assessment by search fund investors and a general guide to screening, monitoring, and exiting search fund investments. We find that although participants in this study maintain that the search fund model aligns the interests of investors and entrepreneurs, honesty and ethics are still the most important considerations for investing. Most investors care about sales skills and operational experience over financial skills or deal-making ability.

TOPICS: Private equity, portfolio construction, real assets/alternative investments/private equity, quantitative methods