Never say never
Why “never lost LP capital” and "never issued a capital call" are short sighted statements
Happy Sunday!
Have you ever seen a real estate deck from a GP that says one of the following?
“We have never done a capital call” (or sometimes even we will never do a capital call)
“We’ve never lost LP capital”
To clarify up front, I think many (most?) GPs have good intentions when they’re including these statements - they’re proud of the fact that they’ve avoided challenges and in some cases even funded capital gaps themselves. The challenge is that both track records and self funded related party loans are tricky topics as I discuss in Track Record Audit and Capital calls to pay off a GP loan.
Today I’d like to explore this topic deeper in three parts:
Why the “never” statements are typically deceptive to the reader
Why the “never” statements typically have the opposite impact of what you’d expect
Suggest a better way of rephrasing your “never” statements