The Market Potential for Search Funds in Denmark: A Feasibility Study of the Search Fund Model in Denmark

Jonas Lyngsø & Rasmus Winkler Svennesen

Student thesis: Master thesis


Search funds are a niche investment vehicle that allows young professionals to search for, acquire, and manage a company. Since its inception in the United States in 1984, 413 search funds have been raised worldwide and provided American investors with an IRR of 34%. Despite the promising returns, no search funds have seen the light of day in neither Denmark nor the Nordics. Moreover, the current low interest rate environment is putting downward pressure on returns and has investors chasing new investment opportunities. This begs the question whether search funds are a viable investment model in Denmark.
This thesis contributes to the scarcely researched field of search funds by exploring what the outlook is for search funds in Denmark as seen from the investors’ perspective. To accomplish a coherent and comprehensive study of this infant asset class, an explorative study rooted in pragmatism is employed to undertake a multidimensional analysis consisting of the international development and performance of alternative asset classes, investor perspectives, and finally, socio-economic factors. For the core of the thesis, conventional qualitative methods used in similar existing research is combined with content analysis to enable statistical analysis of 30 interviews conducted with Danish investors including buyout funds, pension funds, family offices, venture capital funds and business angels.
The findings of the thesis suggest a cautious positive outlook for search funds in Denmark, although the time horizon is very uncertain. This is substantiated by the slower international development compared to other alternative asset classes. Conversely, it was found that search funds as an asset class has outperformed both buyout and venture capital funds. The impressive returns, the access to investments in unlisted mature companies normally reserved for large institutional investors, and opportunities arising from the succession issue of owner-managed companies were by investors identified as key factors favoring the market potential of search funds in Denmark. However, Danish investors are currently not willing to invest in the search phase, due to perceived governance issues and the intangibility of the investment opportunity. Conclusively, the thesis suggests adaptations to the model to overcome these perceived barriers.
This thesis is, to the authors’ knowledge, the first Danish paper on search funds and the first paper to examine the Danish market, thus placing itself in the forefront of academic literature on search funds in Denmark and providing potential Danish searchers with valuable investor insights.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final ThesisMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2020
Number of pages139