Key Takeaways
- • Co-investment fundraising reached a record $47.3 billion according to PitchBook, even as overall private equity fundraising remained under pressure.
- • Co-investments are often offered on reduced carry and fee terms, and many LPs reportedly reserve 15-30% of their total private investment allocation for these opportunities.
- • Fundraising conditions are a key supply driver: global buyout funds raised 23% less capital in 2024 than in 2023, per Chronograph, pushing GPs to seek outside capital for deals.
- • Co-investment activity has been cyclical: a reported $8.7 billion was raised in 2023, more than $10 billion below the 2021 peak.
- • Some LPs have slowed new co-investment commitments due to capital constraints and overallocation to private equity, underscoring that demand is not uniform.
Summary
Institutional investors are increasing direct private equity exposure through co-investments, with fundraising for these vehicles reaching a record level, according to PitchBook data cited in trade coverage. The publication reports that co-investment funds raised $47.3 billion in the most recent full year, even as private equity fundraising overall has been weaker, a divergence that highlights the growing preference of limited partners (LPs) for direct, deal-by-deal exposure.
The economic case for LPs rests largely on fee and carry terms. Co-investments are frequently offered on reduced carried interest and management fees, allowing investors to lower the blended cost of their private equity programs. Industry commentary cited in the coverage indicates that many LPs now reserve as much as 15-30% of their total private investment allocation for these opportunities, and many treat co-investment rights as a central term in their fund commitments.
General partners (GPs) also benefit. Co-investment capital lets managers pursue large transactions without breaching fund concentration limits or diversification targets, and it can fund add-on acquisitions or growth capital for portfolio companies that fall outside a fund's original mandate. Chronograph data cited in the coverage shows that global buyout funds raised 23% less capital in 2024 than in 2023, with more than a third of funds taking two or more years to close, which has increased GPs' reliance on co-investor capital to complete deals.
The trend has not been linear. Reported co-investment fundraising was only $8.7 billion in 2023, more than $10 billion below the 2021 high-water mark, before recovering. Demand remains sensitive to market conditions: some LPs have tapped the brakes on new co-investment commitments because of capital constraints and overallocation to private equity, and deal flow continues to depend on broader market dynamics. Source reporting on the 2025 and 2026 outlook suggests continued elevated activity, though the specific deal-count data in these reports covers private equity transactions generally rather than co-investments alone.
The economic case for LPs rests largely on fee and carry terms. Co-investments are frequently offered on reduced carried interest and management fees, allowing investors to lower the blended cost of their private equity programs. Industry commentary cited in the coverage indicates that many LPs now reserve as much as 15-30% of their total private investment allocation for these opportunities, and many treat co-investment rights as a central term in their fund commitments.
General partners (GPs) also benefit. Co-investment capital lets managers pursue large transactions without breaching fund concentration limits or diversification targets, and it can fund add-on acquisitions or growth capital for portfolio companies that fall outside a fund's original mandate. Chronograph data cited in the coverage shows that global buyout funds raised 23% less capital in 2024 than in 2023, with more than a third of funds taking two or more years to close, which has increased GPs' reliance on co-investor capital to complete deals.
The trend has not been linear. Reported co-investment fundraising was only $8.7 billion in 2023, more than $10 billion below the 2021 high-water mark, before recovering. Demand remains sensitive to market conditions: some LPs have tapped the brakes on new co-investment commitments because of capital constraints and overallocation to private equity, and deal flow continues to depend on broader market dynamics. Source reporting on the 2025 and 2026 outlook suggests continued elevated activity, though the specific deal-count data in these reports covers private equity transactions generally rather than co-investments alone.
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