Does the pref even matter?

A deep dive on preferred returns in syndicated LP investments

Welcome back and I hope you all enjoyed the long weekend.

Today I’d like to deep dive on the topic of preferred returns (also referred to as pref), something I find to be often deeply misunderstood among LP investors.

We’ll cover three topics:

1. What is a pref (and more importantly what it’s not!)

2. Why you can’t look at a pref in a vacuum

3. Isn’t a 90/10 split with no pref better for the LP than 80/20 with 8% pref?

   1. AKA “to pref or not to pref” 😊

We’ll run through these in detail and I’ll also provide a graphical example to illustrate a point on the third topic.