In a session hosted by Scott Miller of Greenhaven Road Capital, the audience was introduced to a niche but remarkably successful investment strategy: the search fund. The session featured JT Fitzgerald, CEO of Kingsway Financial Services (NYSE: KFS), and Adam Patinkin, Managing Partner of David Capital Partners and an activist investor in the company. They presented Kingsway as a unique, publicly traded vehicle for investors to gain access to this high-returning asset class.
The Search Fund Model: A Structural Anomaly
A search fund is a vehicle where an entrepreneur raises a small amount of capital from investors to fund a search for, and subsequent acquisition of, a small, profitable business. These target companies typically have $1 to $4 million in EBITDA and are being sold by a retiring founder.
The model’s success is rooted in a structural market inefficiency. These businesses are too small to attract the interest of traditional private equity firms, for whom a small deal represents a poor return on time. Furthermore, the imminent departure of the founder-operator creates a succession problem that most financial buyers are unwilling to solve. The search funder—a talented, ambitious, and energetic individual—is the “uniquely shaped key” that fits this specific lock, providing both capital and a successor CEO in a single package.
The historical returns have been extraordinary. A long-term study by Stanford University, which tracks the performance of the asset class, found that an investor who had invested pro-rata in every search fund ever formed would have achieved a compound annual IRR of 35% over three decades.
Kingsway: Institutionalizing the Search Fund Model
JT, who began his own career as a search funder, has spent the last several years transforming Kingsway from a failed insurance holding company into a “search fund accelerator.” The Kingsway platform is designed to institutionalize the search model and mitigate its key risks.
De-risking the Process: Kingsway provides its hand-picked Operators-in-Residence (OIRs) with a suite of resources that an independent searcher lacks. This includes a proprietary deal-sourcing infrastructure, deep underwriting expertise, superior financing terms from banking partners, and, crucially, post-acquisition operational support. This support is delivered through the “Kingsway Business System,” a set of playbooks inspired by the famed Danaher Business System (DBS). The OIRs are advised by a board that includes former Danaher CEO Tom Joyce and The Outsiders author Will Thorndike.
The Public Vehicle Advantage: As Adam explained, Kingsway solves the primary problem for investors wanting to access this asset class: scalability and liquidity. Instead of writing a series of small, illiquid, 15-year-lockup checks, investors can simply buy a publicly traded stock. This structure provides daily liquidity with no double layer of fees. The case is further enhanced by Kingsway’s legacy: over $600 million in Net Operating Losses (NOLs), which will shield the cash flows from its operating companies from federal taxes for years to come.
After a successful proof-of-concept exit—a home warranty business called PWSC that returned 10 times the original equity investment in four and a half years—Kingsway is now scaling its platform. It currently owns 15 businesses, focusing on sectors with recurring revenue like B2B services, vertical market software, and skilled trades, where it is executing a buy-and-build strategy in the plumbing industry. Kingsway represents a compelling synthesis of public and private market strategies, using a liquid public currency to execute a proven, high-return strategy in an inefficient corner of the private market.
Let’s go deeper.
