Family Office Co-Investment Appetite
A family office's willingness and capacity to invest directly in specific deals alongside a GP's fund, typically with reduced or zero fees and carry.
Co-investment appetite signals deal-by-deal opportunity beyond fund commitments, often representing larger total capital deployment with better economics for both GP and FO.
Expanded Definition
Co-investment appetite varies by: capital availability (dry powder beyond fund commitments), internal deal execution capability (staff to diligence and monitor direct investments), decision speed (ability to move quickly on opportunities), and strategic objectives (desire for concentrated exposure, sector expertise, or portfolio company engagement).
High-appetite FOs often: maintain dedicated co-investment allocation (10-30% of portfolio), have deal team with direct investment experience, move quickly on opportunities (days to weeks), and syndicate co-investments with other FOs. Low-appetite FOs typically: commit fund-only, lack internal capability for direct diligence, or prefer diversification over concentration.
Signals & Evidence
Co-investment appetite indicators:
- Track record: Observable direct investments, SPV participations, co-investment history with other GPs
- Team capability: Investment team with deal experience, transaction professionals, sector specialists
- Capital structure: Disclosed co-investment allocation, dry powder availability, liquidity profile
- Process indicators: Fast decision-making on opportunities, streamlined legal process, standing co-investment criteria
- Syndicate participation: Active in FO networks, co-investment clubs, or collaborations with other families
Decision Framework
- Qualification: Assess internal capability (team, speed, capital), track record (prior co-investments), and stated appetite
- Offering strategy: Introduce co-investment opportunities early if appetite exists; reserve allocation for strategic FO relationships
- Economics alignment: Structure reduced fees/carry to incentivize participation while maintaining GP economics
Common Misconceptions
"All large FOs want co-investments" → Many prefer fund-only for diversification and delegate diligence to GP. "Co-investment = less fund commitment" → Often FOs do both; co-investment supplements rather than replaces fund allocation. "Free carry is required" → Economics vary; some FOs accept carry on co-investments for aligned GP incentives.
Key Takeaways
- Co-investment appetite correlates with internal capability (team strength, deal experience) and capital availability
- High-appetite FOs represent larger total deployment opportunity (fund commitment + co-investments) with better blended economics
- Assess through track record, team structure, and stated allocation strategy; offer early to strategic relationships