LP co-investments
Do you have a co-investment program?
Co-investment has become an established feature of the PE ecosystem, with firms offering co-investment in increasing numbers to lock in LP support. Co-investment provides LPs with more control over the composition of their portfolios and the opportunity to invest subject to reduced or no fees. In addition, it also enables GPs to diversify risk and conserve fund capital in a tight fundraising market. According to StepStone research, co-investment deal volume has increased by almost a third since the first COVID lockdowns. More than half (52%) of respondents run a co-investment program, which highlights the importance of the strategy for strengthening LP ties. “In this market, you want to make sure that your client keeps coming back to you. If the GP wants to please an important LP, then co-investment opportunities are one of the ways to do so,” Comis says. Co-investment programs are proving especially popular in Asia, with 60% of APAC respondents saying they have a co-investment program, up from 40% a year ago. The co-investment ecosystem in APAC is established, with large sovereign wealth funds in the region well-versed in managing sizeable portfolios. More APAC-based GPs are now using the underlying sophistication of the APAC co-investment market to pursue their own co-investment ambitions. “Across APAC, there has been a real drive within the GP community to align more closely with LPs, and offering co- investment is part of that. It addresses the LPs’ desire for more flexibility and control over their portfolios, and we definitely see a diverse cohort of GPs responding to that,” Pedersen says. When operating co-investment programs, most GPs (62%) are doing so opportunistically, up from 48% in last year’s survey. The opportunistic slant highlights how the timing of co- investments can be unpredictable, particularly in light of the fact that LPs prefer to take a highly selective approach to the strategy, as opposed to filling a rigid deployment target.
52%
48%
TotǸl
60%
40%
AsiǸ-PǸcific
54%
46%
EMEA
47%
53%
North AmȃricǸ
Yȃs
No
How is your co-investment program structured?
Opportunistic FormǸl, includinȌ co-invȃstmȃnt fund Sidȃ lȃttȃr-bǸsȃd
6%
32%
62%
Across APAC, there has been a real drive within the GP community to align more closely with LPs, and offering co-investment is part of that. Maria Tan Pedersen Dechert LLP
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