Blended IRR across 14 deals is landing 4 points under the advertised numbers

Question

I've been tracking a book of 14 equity deals across three platforms, targets ranging 11 to 16 percent IRR. The realized and marked blend is coming in around 8. Nothing has gone to zero, but distributions get paused, hold periods stretch from 3 years to 5, and the capital just sits.

My question is about how to underwrite the platform layer rather than the deal layer. If I assume every sponsor's projection is optimistic by roughly the same amount, then I'm really selecting on dispersion, not on average. So what actually differentiates platforms? Fee load I can read in the offering docs. What I can't read is how a platform handles a sponsor who stops reporting, or whether they have any real recourse when a capital call goes out.

Has anyone found a way to test that before committing capital, other than putting money in and waiting five years to find out?

Rena Expert · Accepted Answer

Split the question into two things that get confused. The platform is a distribution channel and an administrator. The sponsor is the party whose operating decisions determine outcomes. Almost all of your 4 point gap comes from sponsors, and the platform's contribution is which sponsors it let onto the shelf and what it does when one goes dark.

You can test the second part without waiting five years. Ask a platform directly for their full track record including deals that stopped distributing, deals where a capital call went out, and deals still open past their stated hold. Ask for count and dollars, not percentages. A platform that only publishes realized deals is showing you a survivorship-filtered number, because the ones still open past hold are exactly where the problems live. Ask what their agreement with the sponsor actually obligates on reporting cadence and what happens on breach. Usually the answer is very little, and the honest platforms will say so.

On dispersion, your framing is right but it cuts against you. If projections are uniformly optimistic, selection adds nothing and diversification does all the work, which argues for more deals at smaller checks and against concentrating in the ones with the prettiest deck. Fourteen positions is thinner than it feels once you account for correlation, since several of yours are probably the same property type in the same rate environment with the same exit assumption.

What you haven't raised is the marks themselves. Your blended 8 leans on the platform's own valuation of unrealized positions, and those tend to move down late. Recompute your blend treating every unrealized deal at cost and see if you still get 8.

stephen_ok9 · Answer

The stretched hold period is the part I'd focus on. A 3 year deal that turns into 5 at the same total profit isn't underperforming on dollars, it's just annualizing worse. Half your 4 point gap might be duration rather than sponsor error. Worth splitting your 14 into ones that missed on cash and ones that only missed on timing, because those are different problems and only one of them tells you something about the sponsor.

laurenkim53 · Answer

I've only looked at the debt side offerings on these platforms because the small dollar amounts fit what I can do. Interest either shows up or it doesn't, so there's less to argue about. Probably not useful for your equity book but the reporting is a lot cleaner.

raj_mehta14 · Answer

The reporting obligation point is the bit I'd never have thought to ask about. Is that in the subscription docs somewhere or is it a separate agreement between the platform and the sponsor that investors never see? I've been reading offering documents for a while and I don't think I've ever seen the platform-sponsor side of it.

Blended IRR across 14 deals is landing 4 points under the advertised numbers

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