Date of Award

Spring 2020

Degree Type



Moore School of Business

Director of Thesis

Dr. Ozgur Ince

Second Reader

Mills Snell


This thesis aims to build off the existing research on the advantages of permanent equity within the micro-cap market space. This strategy combines many advantages from private equity, venture capital, small-cap, and value / quality investing in order to generate a differentiated return. While the pros and cons of these various strategies have been explored by previous academic research, not much has been written on the actual implementation and choices practitioners must make when they decide how to deploy capital. In order to dive deeper into implementation, this thesis presents several anecdotes of various firms that invest in this space according to different risk appetites and objectives. It will walk through some of the considerations that investors take into account when making each of these decisions.

My introduction to this niche corner of investing came from a freshman year internship working at a firm called Bluegrass Equity based in Lexington, Kentucky. There I got some first-hand experience working alongside the founder to learn how to identify quality businesses efficiently and how much true value-add an investor can provide small business owners, while still maintaining the opportunity to earn a sizable return. The alignment of incentives allows both parties to benefit. However, as I became more familiar with the space, I began to realize that the firm I was working at made some active choices that had different risks and benefits than other firms within the industry. Therefore, this thesis will represent a culmination of interviews from various industry professionals, personal experience, news articles, and prior research papers / professional publications that examines all the choices investors make that can potentially lead to outsized alpha generation, or excess return on an investment relative public markets.

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