A club deal is a private equity investment that involves a small group of like-minded investors, usually 2 or more private equity firms, family offices or wealthy individuals, hence the “club”.

A club deal, also referred to as a syndicated investment, is an investment where the investor group formed by a number of qualified or professional investors pools its capital together and invests collectively. The practice allows club deal participants to make larger and more expensive investments than each investor could achieve through its own resources.

• Investors can choose the projects, and the capital they place on their projects of choice
• Investors can opt-in (or not) to an investment and invest separately through another vehicle
• Investors avoid numerous intermediaries (funds and funds intermediaries, bank, custodian, broker)
• Substantially more transparency and control than that afforded by a fund,  unrestricted access to the operating information
• More targeted results, for a fraction of the cost of traditional funds
• Maximum efficiency: NO un-deployed Investor funds
• A savvy Board can be a source of strategic initiatives and ideas (ie. M&A) and stimulate the executive/operational teams to think more broadly and creatively about opportunities

It’s all about capital allocation efficiency. Club deals gather together smart players with efficient strategies. When the real estate developers know that they can count on light-speed answers (whether it is a yes or a no), they can identify projects early on.

The second catalyst is the high degree of transparency in the terms and characteristics of a project. Unlike blind pool investments, club deal investors select precisely where they invest. Sometimes, they will even participate in identifying potential investments. So they can get a tailored products with a clearly defined investment target and an up-to-date business plan.

The third catalyst is alignment of interest. Investors’ proximity to the sponsor favours a clear exchange of information, financial and field data. The common incentive is to repeat the same club deals on future operations together, and trust becomes the most valuable outcome of a club deal.

There are many ways to guaranty interests’ alignment with Preferred returns, such as IRR waterfall splits, where investors have a first right on the first distributions.

Lastly, club deals offers flexibility. On one hand, deals are tailored to the investors in terms of horizon, ticket size, returns, diversification and risks. On the other, they allow for quick decisions, precisely where the “equity gap” remains, because the investment is not tied to rigid fund terms.

• Better selection: Collective intelligence will favour the best projects and eliminate the weaker ones.
• Better sourcing: Leading platforms funnel curated projects, irrespective of their country of origin, generating a wider deal flow, and attracting a growing investor pool.
• Marketing automation: Online marketplaces embrace marketing automation by integrating emailing power, social community management, and data analysis.
• Relation automation: Online marketplaces facilitate the transition to full automation by channeling data
• Funding at every level: time is money, and raising money takes a lot of time. Too much time kills projects.

Also known as real estate syndication, real estate club deal is an effective way for investors to pool their financial and intellectual resources to invest in properties and projects much bigger than they could afford or manage on their own.

A mutual or commingled fund typically has a large number of investors. The general partner (GP or investment manager) has the discretion to purchase, finance, manage and sell a portfolio of assets that it selects at its discretion, according to broad investment criteria.

In addition, the GP receives a management fee and carried interest distributions on profits.

Larger institutional investors have been looking for alternatives to funds, which would offer them greater control, customization, flexibility and better pricing.

Came the JV model where large investors are placing larger amounts of capital with a smaller number of investment managers, requesting tailored investment strategies and input on asset management decisions.

Also, large investors want to avoid to be part of a vehicle with a large number of small investors who where selected without their input. A JV allow large investors to invest alongside a small number of other “like-minded” investors with actionable capital.

By contrast to a Club deal, a syndicated loan involves a Lead bank or sponsor which controls the decision-making process. The Lead receives extra compensation (fees) from the other investors and shares the profits.

A “Club” is the exclusive association of a limited number of persons to share and support a common project or goal.

Crowdfunding, by contrast, is a large group of people accessing less restricted or unrestricted projects.