Asset Class
Co-Investment
Co-Investment is a direct investment alongside a GP in a specific deal, typically offering lower fees and tighter exposure. Allocators evaluate co-investments through information quality, governance rights, speed constraints, and underwriting alignment with the lead sponsor.
Co-investments allow LPs to increase exposure to specific deals without committing more to blind-pool funds. For allocators, the challenge is execution: timelines are fast, information is asymmetric, and governance rights vary.
How allocators define co-investment exposure
Segmentation includes:
- Sponsor-led vs syndicated deal distribution
- Governance rights: info rights, consents, board observation
- Underwriting: independent validation vs sponsor reliance
- Concentration: single-asset risk and portfolio fit
- Execution speed: ability to decide within days/weeks
- Economics: fees, carry, and hidden platform costs
Allocator framing:
“Do we have enough time and information to underwrite independently?”
What slows decisions
- Insufficient data room quality
- Speed constraints that exceed governance capacity
- Weak governance rights and reporting commitments
- Concentration risk not compensated by economics
Key Takeaways
- Co-investing is an underwriting and execution capability test
- Governance rights and data quality determine institutional comfort
- Lower fees don’t compensate for poor information and control