A search fund is an investment vehicle, conceived in 1984, through which investors financially support an entrepreneur’s efforts to locate, acquire, manage, and grow a privately held company.
The model offers relatively inexperienced professionals with limited capital resources a quick path to managing a company in which they have a meaningful ownership position.
Since 1996, the Stanford Graduate School of Business CES has conducted a series of studies on the performance of search funds (see links below). The CES has identified and tracked more than 177 search funds raised since 1984; many of them have purchased companies in the United States and Canada. The growing cohort of international funds located throughout western Europe, Latin America, and India are now tracked by our counterparts at IESE Business School in Barcelona, Spain.
A 2016 CES analysis of 258 qualifying search funds found the aggregate pre-tax internal rate of return to be 36.7%, and the aggregate pre-tax return on invested capital to be 8.4x.