Co-Investment Opportunities: When to follow a general partner and when to walk away 

The pitch is compelling: invest alongside your General Partner in a compelling deal, typically with no or low fees, more control over your investment, and the ability to build meaningful positions in companies you understand. When executed well, co-investments may enhance the risk-adjusted returns of a private markets program. Done poorly, they can become a graveyard of rushed decisions and concentrated losses. The gap between those two outcomes usually comes down to one thing: discipline.

Co-investments offer several potential advantages over traditional fund investing. The most obvious is economics — fee structures on co-investments are typically potentially more favorable, which may improve net returns over time. Beyond fees, co-investments may offer Single Family Offices something that blind-pool fund structures can’t: the ability to express views on a specific industry, geography, and company type. If you’ve spent thirty years building and operating businesses in healthcare, taking a direct co-investment position in a healthcare company alongside a GP you trust is a fundamentally distinctive proposition.

There’s also the matter of capital deployment. Co-investments can help accelerate the pace at which committed capital gets to work, may help reduce the drag of the J-curve that tends to frustrate family offices in the early years of a private markets program.

The risk profile of co-investments are different and often require specialist knowledge and expertise. Firstly, GP selection is crucial and investors need to ensure they are partnering with GPs that have a track record of delivering value for their LPs. Second, the due diligence timeframe on a co-investment opportunity is almost always compressed. Investors have to quickly form a view, complete their analysis, and invest. There is little room for error.

As part of the co-investment decision-making process, it’s worth being honest about whether you have the expertise and time to evaluate and execute these deals - whether that is within or partly outside your family office. There are five practical approaches that we see, and they sit along a spectrum from maximum control to maximum convenience.

Whatever structure you use, the same due diligence questions apply every time an opportunity lands on your desk.

Start with the GP. Is this deal squarely within their area of demonstrated capability? A buyout firm that has spent twenty years acquiring industrial distribution businesses is on solid ground when they bring you a co-investment in that sector. The same firm pivoting to a growth equity deal in software is a different conversation. GPs perform best when they’re operating in territory they know, and co-investment opportunities that sit outside a manager’s historical strengths should be viewed with caution regardless of how the deal is packaged.

Then ask why you’re being offered this.  Strong GPs recognise the value in strengthening their relationship with LPs who regularly invest with them and could offer co-investment access as part of a genuine relationship. We believe the quality of your GP relationships is ultimately the quality of your deal flow.

Think hard about your own capacity to evaluate the deal in the time available. Co-investments require a different analytical skill set than evaluating a fund - you’re making a company-level judgment, not a manager-level one. And unlike fund commitments, they don’t allow for the diversification of a single misjudgement across a portfolio of companies.

Perhaps the most underappreciated aspect of building a co-investment program is the virtue of consistency. In our experience, family offices that typically do well in co-investments are those that have deployed capital steadily across vintage years and deal sizes rather than concentrating activity when markets feel favourable and going quiet when they don’t. Vintage year diversification in co-investments is not just about risk management - it’s about building relationships with GPs who come to see you as a reliable, professional partner rather than an opportunistic one.

Co-investments can be a meaningful component of sophisticated family office portfolios however, attractive economics don’t compensate for inadequate due diligence, the wrong GP relationships, or a structure that doesn’t match your actual capabilities. If you rush past the foundations, you may learn an expensive lesson about why the fees in the main fund were worth paying.

It is also important to recognize that co‑investments are not universally appropriate for all family offices or in all market conditions. Co‑investments can be a poor fit where teams lack the speed, governance, or expertise required to underwrite and execute transactions alongside sponsors, or where portfolio construction would become overly concentrated by sector, geography, or sponsor. They may also be less suitable for families that prioritize liquidity, predictable cash flows, or minimal administrative complexity, given the idiosyncratic risk, uneven pacing, and ongoing monitoring requirements involved. In such cases, a more diversified commingled fund approach or a simpler outsourced solution may better align with the family’s resources, risk tolerance, and long‑term objectives.