“Our average return was…” is the beginning of a due-diligence conversation, not its conclusion.
Ask for a deal-by-deal table with investment dates, contributed capital, distributions, current estimated value, realized status, and the team’s actual role. Put gross asset performance and net investor performance in different columns. They answer different questions.
Then examine the population. Does the table include every investment in the stated strategy and period, or only selected successes? Were unsuccessful investments excluded because they used a different entity? Are old investments from a different team mixed with the present team’s work?
An unsold asset’s estimated value is not sale proceeds. That does not make the estimate useless; it means the valuation date, method, and assumptions belong beside it. Ask how the estimated result changes if the exit takes longer or the asset sells for less.
Try this before your next call: choose one strong deal and one weak deal. Ask the sponsor to walk you from original underwriting to actual cash movements for both. Request the same level of detail each time.
A useful comparison is not “Sponsor A says 18%; Sponsor B says 16%.” It is “These results cover these investments, these periods, these fees, and these valuation assumptions.” If those pieces differ, the headline comparison may tell you very little.
Related reading: Sponsor Due Diligence: 12 Questions Beyond the Pitch Deck
Get one practical guide each week to help you ask better questions before committing capital.
This guide is for educational purposes only and is not investment, legal, or tax advice. Private investments can be illiquid and can lose money. Review the governing documents and consult your own advisers before investing.