Introduction

Co-investments have become an increasingly prominent feature of private markets. Rather than committing exclusively to blind-pool funds, investors are increasingly seeking direct exposure to specific transactions — often alongside a lead private equity firm, institutional allocator, or manager.

A co-investment is exactly that: an opportunity to invest directly into a single asset, company, or project alongside a lead sponsor. For sophisticated investors such as family offices, sovereign funds, and pension plans, co-investments offer exposure to high-quality transactions with lower fees, greater alignment, and enhanced control.

How Co-Investments Work

In a typical scenario, the lead sponsor — usually a private equity firm or specialist manager — originates and diligences an opportunity, committing significant proprietary capital. To complete the transaction or diversify its own fund exposure, the sponsor then offers a portion of the deal to co-investors.

Co-investors rely on the sponsor’s origination, due diligence, and execution capability, but commit their own capital directly into the deal. This bypasses much of the fund-level fee structure and provides investors with direct ownership stakes in the underlying asset.

For example, in a $100 million acquisition, a private equity sponsor might commit $60 million and syndicate $40 million to co-investors. The sponsor remains responsible for execution and management, while co-investors participate directly in the upside (and downside) of the asset.

Advantages of Co-Investments

Access to Proprietary Opportunities

Co-investments grant investors exposure to transactions that are rarely available on a standalone basis. These are often sponsor-led deals with full due diligence already completed.

Fee Efficiency

Compared to traditional fund commitments, co-investments typically carry reduced or zero management fees and carried interest. According to Preqin, average co-investment fee levels are significantly lower than standard fund terms, enhancing net returns.

Portfolio Diversification

Rather than committing to a 10-year blind-pool fund, co-investors can build bespoke exposure deal by deal. This allows family offices and institutions to diversify across sectors, geographies, and deal vintages more selectively.

Alignment of Interests

Because the lead sponsor commits significant capital alongside co-investors, interests are tightly aligned. The sponsor has “skin in the game,” reducing the risk of moral hazard and ensuring co-investors share in the same outcomes as the manager.

How to Source Co-Investments

Despite their appeal, sourcing co-investments is not straightforward. Access is typically restricted to investors with established networks, credibility, and capital. Common avenues include:

  • Direct Relationships with Sponsors: Large institutional LPs with meaningful fund commitments are often offered co-investment rights as part of their agreements.
  • Advisory Firms and Intermediaries: Some investment banks and boutique advisers syndicate co-investment opportunities to their clients.
  • Specialist Co-Investment Platforms: Increasingly, investors rely on dedicated platforms that source, structure, and syndicate co-investments across private equity, private credit, and real assets.

At Kingsbury & Partners, our platform provides investors — particularly family offices and institutions — with curated co-investment opportunities in structured private credit and asset-backed finance. Each opportunity is evaluated through our Product & Risk Committee, with governance, reporting, and transparency embedded from origination through to monitoring. This allows investors to access institutional-grade opportunities without the need to commit to a full blind-pool fund.

Risks and Considerations

While attractive, co-investments also present unique challenges.

  • Concentration Risk: Each deal is typically a single-asset exposure. Unlike a fund, risk is not diversified across a portfolio.
  • Due Diligence Dependence: Co-investors rely heavily on the sponsor’s diligence and structuring. Independent review is essential to avoid blind reliance.
  • Illiquidity: Co-investments are private and illiquid. Investors must be prepared to hold to exit, whether via sale, IPO, or refinancing.
  • Speed of Execution: Opportunities often require rapid commitments. Investors without established processes risk being excluded from allocations.

Who Should Consider Co-Investments?

Co-investments are most appropriate for sophisticated investors with governance frameworks in place to evaluate private market transactions. They appeal to:

  • Family Offices seeking lower-fee exposure to private equity or private credit deals.
  • Institutional Allocators aiming to complement fund commitments with targeted exposures.
  • High-Net-Worth Investors with access to co-investment platforms or sponsor relationships.

Investors must balance the attraction of lower costs and direct exposure with the need for sufficient internal resources or advisory support to evaluate and monitor deals.

Conclusion

Co-investments sit at the intersection of access, alignment, and efficiency. They allow sophisticated investors to participate in high-quality private market transactions, reduce fee drag, and tailor portfolios with precision.

However, the benefits come with responsibilities: the need for rapid decision-making, independent diligence, and a tolerance for concentrated, illiquid exposures. For family offices and institutions with the governance capacity to manage these requirements, co-investments are a powerful complement to traditional fund commitments — offering both strategic and financial advantages.