Co-investment transactions have become a staple of today's
private equity landscape.
A strong private equity market has helped fuel co-investment
activity as co-investors look to increase their private equity
exposure on a reduced-fee basis and sponsors look to attract
additional capital to access larger deals. Here are some of the
latest trends we are seeing in the co-investment
market.1
Fee terms
One of the primary selling features of co-investments for
investors is the reduction or no management or carried interest
fees at the co-invest level. This remains true for traditional
co-investments in which the co-investors invest alongside the
sponsor's primary fund. However, we are seeing an increasing
number of co-investment-type transactions by "fundless
sponsors"—sponsors that have not raised a fund but
instead raise capital on an investment-by-investment basis. These
transactions often have terms much like those of a traditional
co-investment.
