Kingsway Financial Services Investment Thesis
The Only Public Search Fund in America - and Almost Nobody Knows It Exists
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Most investors have never heard of a search fund.
That is not surprising.
For four decades, the model has been the preserve of a small, well-connected circle of institutional investors and wealthy individuals. There are no ETFs tracking it. No public companies offering exposure to it. Stanford has quietly documented it since the 1980s and the numbers are remarkable: pooled IRRs of around 32%, aggregate returns of roughly 5x.
The reason the returns are so good is also the reason almost nobody can access them. Search funds buy small, profitable businesses that institutional private equity ignores entirely, typically at 4 to 6x EBITDA. They install hungry, incentivised operators to run them. And they hold permanently.
Until now, the only way in was knowing the right people.
Today’s company has built the first publicly traded vehicle for this model in the United States. It is systematising and scaling the search fund playbook into a permanent-capital platform, backing entrepreneurial CEOs to acquire and grow recurring-revenue service businesses at attractive multiples.
Management owns 27% of the company. Revenue is growing at 37% year-over-year. A $330 million tax shield means most future earnings drop straight to the bottom line.
And yet most screens classify this as a property and casualty insurer.
In the rest of this post, I discuss:
The two business segments and the milestone that changes everything
The search fund model and the historical returns behind it
The J-curve dynamic and why current margins are misleading
The $330 million NOL portfolio and what it means for future earnings
Valuation and what the upside looks like from here
Risks to the thesis
Whether it is in my portfolio