Earlier this quarter Stanford released its 2026 Search Fund Study. It's the closest thing the search fund world has to a census; it covers 862 funds, success rates, and key performance metrics (they’ve run the study every two years since 1996; they’ve been tracking since 1984).
For readers unfamiliar with the term, a search fund is a vehicle where an entrepreneur raises capital upfront to fund a search for a single company to acquire, then steps in to run that business directly as CEO once a deal closes.
Unlike traditional venture-backed founding or bootstrapping, the entrepreneur is buying and operating an existing business rather than building one from scratch.
Buried a few pages past the headline return numbers was a category Stanford hadn't tracked in previous editions (and the one that most caught my attention): the Long Duration Enterprise, or LDE.
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The study identified 67 of them across the US and Canada, and 63% of those launched in 2024 or later… meaning most of this category didn't exist three years ago. Instead of raising money to search for one company, buy it, and return the fund inside 5-7 years, LDE founders raise capital upfront and plan to hold what they buy for 10+ years (sometimes indefinitely). LDE’s fund future acquisitions with the cash flow those businesses generate rather than going back to investors for a new raise every time; they get paid based on the return on invested capital they actually produce (rather than an annualized IRR that rewards a fast exit).
Permanent capital predates LDEs
Long duration, or “permanent” capital, isn't a 2026 invention. Warren Buffett has held some of Berkshire Hathaway's best businesses for decades because he was never on a fund clock forcing him to sell them.
Firms like Permanent Equity and Chenmark, which deal in the small business acquisition space similar to our strategy at City Different Acquisitions, have run a similar playbook for the better part of a decade: buy a good business, hold it a long time, and don't force an exit that isn't necessary.
Family owned businesses have operated this way for generations without needing a case study to explain it. You don't sell the thing that's working just because a calendar says it's time.
My read is the market created a new term for something institutional capital is rediscovering. What is new, however, is the infrastructure forming around the concept.
Continuation vehicles (structures that let a private equity firm move a company out of an aging fund and into a new one instead of selling it), have grown quickly.
Evergreen and semi-liquid fund structures (vehicles with no fixed end date at all), now hold more than a trillion dollars globally… and are growing quickly.
The search fund world's version of this trend is smaller and newer, but it's the same instinct: an exit should be a choice, not an obligation baked into the paperwork.
Why now (and why it's not automatically better)
Some of this shift is defensive. I wrote last month about the distributions problem in traditional private equity: buyout holding periods have stretched well past six years on average; trillions of dollars in unrealized value are sitting in portfolios waiting for exits that aren't coming as fast as the original pitch decks promised; and continuation vehicles have become one of the industry's primary tools for buying time without formally admitting the exit market is stuck.
Put more plainly: a continuation vehicle can reflect a genuine decision to keep a great business a little longer, or it can be a way to avoid marking down a fund that isn't going to hit its return targets on the schedule investors were promised.
The search fund side of this appears to have more honest motivations. The traditional search fund model is hard on the person running it: roughly half of all searchers who raise capital never end up acquiring a company, and a meaningful share of the ones who do acquire something end up with little to show for it.
An LDE, by raising more capital upfront and spreading it across several acquisitions instead of one, gives an operator room to be wrong once without the whole venture ending… and gives investors a diversified bet instead of a single roll of the dice.
That said, there are real costs to this approach. Locking up capital for 15 or 20 years is a big ask of an investor. Life happens: a divorce, an illness, a child's tuition bill… and there's no dependable market to sell into if that money is needed early.
A recent Yale case study on these holding company structures ran the actual present value math and found that, once you discount a twenty year payoff back to today, the economics aren't obviously better than a traditional, shorter search fund.
Our view is that they’ve reached the right conclusion: you should choose a long duration structure because you want to build and own something for a long time, not because the math promises a better outcome…. because it doesn't (at least not automatically).
Where our approach differs
We'd call ourselves long duration investors (and we've been one since before the term existed for our corner of the market). But City Different Acquisitions differs from a typical LDE in material ways.
Most LDEs raise a large pool of committed capital before they know which businesses they'll buy, then deploy it across a planned series of acquisitions. We don't do that. We raise capital deal by deal, one business at a time, rather than asking investors to commit blind to a pool they can't yet evaluate. We think that's the better structure because every investor knows exactly what they own; we're never under pressure to deploy capital just because we raised it; and the decision of whether to keep investing alongside us sits with each investor after every single deal (rather than being locked in for a decade up front).
The other difference is how we think about returning capital. Most long duration vehicles, including LDEs, are still underwriting toward an eventual liquidity event somewhere out on the horizon… they've simply pushed that horizon out further than a traditional fund would. We aren't underwriting toward a single terminal sale at all… our objective with City Different Acquisitions is to return capital to investors through ongoing, quarterly cash distributions paid out of the businesses we own while we own them, not through one large payday at the end of a hold period we picked years in advance.
Why we built it this way
Our answer is that artificial, contractually obligated, short holding periods are bad for almost everyone except the private equity firm holding the clock. A ten year fund life sounds patient until you remember it comes with a hard deadline (and as that deadline approaches, the incentives materially change). A management team that was making sound long-term decisions starts getting nudged toward decisions that make the business look better for a sale (things like deferring maintenance, thinning out staff, trimming the marketing budget to pad EBITDA).
None of that helps the business, and none of it helps the employees who work there, the customers who depend on it, or the community it serves. It helps the fund hit its return target on schedule, and that's the only stakeholder a forced timeline is built to serve.
We'd rather be stewards. Sometimes being a good steward of a great business means holding it for a long time. Sometimes it means holding it indefinitely, because there's no good reason to sell something that's still serving its people well.
Plenty of buyers will tell a founder they intend to preserve their legacy on the way into a deal. Fewer of them are still saying it five years later, because their fund has a clock and the clock doesn't care about legacy. We think you can tell how much a buyer actually believes in long-term stewardship by looking at whether their capital structure would even allow them to keep that promise if they wanted to.
We've been a long-term, patient investor since City Different Acquisitions started because we believe it's the only structure that truly respects what a founder built and gives a business room to keep being good at what it does. It's an interesting moment to watch the rest of the industry – from a handful of MBA-run holding companies to the largest buyout shops in the world – find its way toward a similar conclusion. Some are getting there for good reasons. Some are getting there because the exit market forced their hand. Either way, we'll take the company.
If you're a small business owner in the Southwest thinking about what comes next (whether that means selling the whole business, selling a piece of it and staying on to run it, or you just want to talk through your options), we'd love to hear from you.
Please contact Joel Van Essen, our Director of Private Investments.
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