What is the expected timeframe for full capital return?

searcher profile

June 12, 2024

by a searcher from University of Guelph in Toronto, ON, Canada

Question for searcher LPs/investors: what is the expected timeframe for full capital return (1x DPI)?

Is there any data out there on this?

Any insights are appreciated. TIA.

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commentor profile
Reply by a searcher
from Cornell University in Philadelphia, PA, USA
Jay -- it helps you to pay back quickly, but it is largely at your discretion. If you pay back capital in full within 1-2 years, it will drastically improve your IRR than if you pay all the capital back in the 5th year. So if you are in a promote scenario in a traditional fund structure, I would suggest trying to pay back capital ASAP. If, however, you are in a self-funded search, pay it back later as the cash upfront will help you grow the business. You can also use a MOIC calculation on your promote to remove the early payback bias.
commentor profile
Reply by a searcher
from Colorado State University in Longmont, CO, USA
Hi Jay. I've seen various proposals from searchers all the way from 1st year payback to zero payback until selling in 5 years. I think it depends on the business plan and cashflow of the business. I personally would like to invest into deals that have a clear plan to pay back the initial investment quickly, as it reduces long term risk for LPs. But the tradeoff could be reduced overall potential return in the long run.
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