A co-investment is an opportunity for limited partners to invest directly in a specific deal alongside the main fund, gaining additional exposure to a particular asset or company without committing additional capital to the blind pool. Co-investments are typically structured through a separate SPV that sits alongside the main fund vehicle, with its own capital table, waterfall terms, and investor registry.
Why Co-Investments Have Grown
Co-investment activity has accelerated significantly in recent years. LPs increasingly reserve 15–30% of their alternative allocations specifically for co-investment opportunities, viewing them as a way to increase portfolio exposure to high-conviction deals, reduce blended fee drag (co-investments often carry reduced or zero management fees and carried interest), and build deeper GP relationships. For GPs, offering co-investment rights helps win LP commitments during fundraising and provides additional capital for larger deals without increasing fund size.
Co-Investment Administration
Co-investments create distinct administrative requirements. The co-invest SPV must maintain its own compliance documentation, distribution calculations, and investor communications — separate from the main fund. When the asset exits, the co-invest waterfall may differ from the main fund's terms. Platforms that manage both funds and SPVs on a single system allow GPs to track LP exposure across both vehicles, share KYC verification between entities, and produce consolidated reporting that shows each investor's total position.