Formation of a Syndication vs Fund

[Logan Guest]

What are differences and various benefits/consistencies of forming a Syndication vs Fund?

[Evan Polaski]

@Logan Guest, as mentioned a Fund is a syndication.  

That being said, most people think of a syndication being a deal brought to investors. So the investors know which deal exactly they would be investing in and can make their decision accordingly.

A fund is typically thought of raising capital to be placed in the future.  So investors are placing commitments with a sponsor, THEN the sponsor starts looking for deals.  Typically, the sponsor will raise enough to invest the capital in several deals, so the investor has a small piece of multiple deals, but no say in which deals they are.

There are pros and cons of each.  Typically, for private investors, I think the project specific, syndication, approach is better.  It lets you pick and choose both sponsors and projects, as well as pick their timing based on capital available.  And, you know when you are putting your money to work, versus having to wait out an investment period.

For the institutional investors, funds seem to be better, because they can allocate large amounts of capital at once. Funds, by nature, have capital calls over the investment window, which can be several years.

In terms of fees, costs, returns, there seems to be very little difference in general.  Each sponsor will set their terms, but I have not seen anything dramatically different between the two.