Syndication funds report higher IRRs than evergreen funds, but that's misleading. Evergreen structures actually deliver better equity multiples because they avoid redeployment delays and tax hits that kill compounding. True value comes from continuous capital deployment, not chasing IRR peaks.
We did a lot of research. I mean, this is stuff we kind of knew intuitively, but there's also some really cool research that we've found that compare these evergreen models with more traditional syndication models. And the IRR fallacy holds true, right? Where you can actually have a higher IRR, right? Which is the gold standard of what every investor thinks that they want. But you compare the syndication IRR, which is slightly higher on average than maybe an evergreen model, but you look at what you're left with, which is equity multiple at the end of the day. These were models that were done over a 10-year time horizon and In every case, you have more money in the evergreen models than you do in the syndication models. Your equity multiple is materially higher because you don't have the drag from redeployment. And you also don't have the tax hit that you have to pay while you're redeploying. And both those things are very, very powerful killers of compounding. It's something a lot of people don't think about because they assume that if I just get higher returns, higher IRRs, then I'm going to come out ahead. But that's actually not the case. The real way that you come out ahead is consistency of being deployed, not taking big losses, and compounding over a longer period of time.
