Direct Co-Investments / SPVs

Co-investments are frequently positioned as “lower fee, higher return.” Institutionally, they are evaluated as a capability and governance test: the allocator must underwrite the specific deal, move quickly, and manage concentration and execution risk. SPVs are the legal wrapper; the real question is whether the deal access and structure are institutional-grade.

From an allocator perspective, co-invest/SPVs affect:

• concentration and single-asset risk,
• governance and information rights,
• fee load (or lack thereof) vs true economics, and
• execution risk (timeline, closing, follow-on needs).

How allocators define co-invest/SPV risk drivers

Allocators segment exposure by:

• Access source: GP-led co-invest vs brokered syndicate vs sponsor direct
• Deal quality and selection: whether co-invest is top-tier access or “risk-offload”
• Alignment: GP economics, carry/fees, and whether GP has meaningful capital at risk
• Governance rights: board/observer rights, information rights, consent rights
• Timeline risk: speed-to-close, diligence depth, and decision cadence
• Concentration controls: portfolio limits and risk budgeting
• Follow-on obligations: future capital needs and dilution risk if not supported

Allocator framing:
“Is this co-invest/SPV institutional access with clean alignment—or a concentrated execution risk with limited governance and unclear selection quality?”

Where co-invest/SPVs sit in allocator portfolios

• larger allocators with internal underwriting capability
• family offices seeking targeted exposures and control over allocations
• used to increase exposure to high-conviction deals while reducing blind pool fees

How co-invest/SPVs impact outcomes

• can improve net returns by reducing fee drag (when deal quality is strong)
• can increase risk through concentration and execution dependencies
• can create operational burden (diligence, legal, monitoring, capital calls)
• can suffer adverse selection if co-invest is used to syndicate riskier deals

How allocators evaluate GPs on co-invest behavior

Conviction increases when a GP:

• offers co-invest access into high-quality deals, not only hard-to-place exposure
• provides clean, fast, transparent data rooms and institutional diligence support
• maintains alignment (GP has meaningful exposure; economics are reasonable)
• is consistent and fair in allocation policy across LPs
• can show realized co-invest outcomes and post-close governance behavior

What slows allocator decision-making

• unclear selection quality (“why is this deal being syndicated?”)
• limited rights and weak information access post-close
• compressed diligence timelines that exceed internal capacity
• ambiguous economics (hidden fees, unusual waterfalls)
• lack of clarity on follow-on capital needs

Common misconceptions

• “Co-invest is always better because fees are lower” → concentration and selection risk can dominate fees.
• “GP co-invest always equals top deals” → sometimes it is risk distribution, not privilege.
• “SPV structure is standard” → waterfalls, rights, and governance vary materially.

Key allocator questions

• Why is this deal being offered for co-invest—what is the GP’s rationale?
• What rights and reporting do we receive post-close?
• What are the true economics (fees, carry, expenses) at the SPV level?
• What is the follow-on capital plan and dilution downside?
• How does this fit concentration limits and risk budgets?