In practice
Co-investment rights are usually set out in the LPA or a side letter, and offers typically go to a subset of LPs with little time to respond. Capital often sits in an SPV formed for the deal. Allocation is at the GP’s discretion, and terms vary. It is often confused with a parallel fund, which invests in every deal alongside the main fund.
An example
Round numbers, not a real fundSay a fund buys a company for $500 million. It puts in $350 million itself and offers $150 million to its investors as co-investment, with no carry.
Why it matters
It is a cheaper way to own more of a deal, and a perk managers use to keep their biggest investors.
In the news
Recent stories that use the term- Gaius Capital closes debut fund at €50 million, raises another €6 million via co-investment vehicle
- One of the world’s largest battery storage systems to be built at biorefinery in Kansas
- PennSERS commits $130 million to buyout fund, co-investment sidecar
- LGPS Central partner funds commit an additional £2bn to private markets
- Banner Capital Management acquires Seaway Plastics Engineering (with MME Group and Wright Engineered Plastics) from ICG
- Norway’s sovereign wealth fund and Art-Invest to invest in German offices
A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.