Deal Flow
Deal flow is the volume and quality of investment opportunities sourced and evaluated over a given period.
Allocator relevance: A leading indicator of sourcing advantage, selectivity, and the ability to maintain underwriting standards at scale.
Expanded Definition
Deal flow describes both quantity (how many opportunities) and quality (how many are relevant and actionable). Strong deal flow can improve selectivity; weak deal flow can force managers into lower-quality investments or style drift. In private markets, consistent deal flow supports pacing and deployment discipline.
For allocators, the key is not “more deals,” but whether deal flow is differentiated and converts into high-conviction investments under consistent underwriting standards.
How It Works in Practice
Managers track sourced opportunities, screened deals, diligenced deals, and closed deals—often described as a funnel. Allocators evaluate deal flow sources (network, proprietary channels), conversion rates, and whether pipeline claims match realized behavior.
Decision Authority and Governance
Governance focuses on ensuring deal selection remains disciplined under fundraising pressure and market cycles. IC processes, concentration limits, and underwriting standards protect against “pipeline-driven” compromise.
Common Misconceptions
- High deal flow guarantees strong performance.
- Deal flow is the same as deal sourcing.
- Pipeline size proves proprietary access.
Key Takeaways
- Deal flow supports selectivity, but discipline converts it into outcomes.
- Conversion rates often matter more than volume.
- Proprietary channels are the real differentiator.