Investor appetite for co-investment continues to accelerate, driven not only by the well-known benefit of accessing deals on a fee-free, carry-free basis, but also by the greater control, diversification and deployment flexibility the strategy can offer. Participants in PEI’s annual co-investing roundtable agreed that co-investment has evolved into a core portfolio construction tool, enabling investors to shape exposures across sectors, geographies, vintages and value creation strategies while deepening relationships with GPs.
At a time of market volatility, slower fundraising and a prolonged exit slowdown, co-investment is also helping LPs deploy capital more efficiently and selectively. Panelists highlighted the ability to pivot quickly between sectors, improve vintage-year diversification and target high-conviction opportunities that may deliver liquidity more rapidly than traditional fund commitments. Meanwhile, GPs are increasingly relying on co-investment capital to preserve fund capacity and support transaction execution.
However, the discussion made clear that successful co-investment program require far more than access to deal flow. Speed of execution, dedicated underwriting expertise and the ability to form an independent investment view were identified as critical differentiators. Market participants stressed that co-investors must be viewed as value-add partners, capable of supporting due diligence, helping manage syndication risk and providing insights that strengthen a sponsor’s investment process.
The roundtable also explored the challenges facing the market, including concentration risk, governance complexity, evolving allocation practices and the emergence of evergreen vehicles. Participants emphasized that strong underwriting discipline remains essential, particularly in an environment where multiple expansion can no longer be relied upon to drive returns. Instead, success increasingly hinges on avoiding overpayment, focusing on organic growth and partnering with high-quality sponsors that can execute differentiated value creation plans. Ultimately, the consensus was that co-investment is becoming more formalized and institutionalized, with risk-adjusted returns, consistency and strong GP partnerships emerging as the defining ingredients of long-term success.
Code: M-007163
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