Key Takeaways
- • Co-investment activity has increased fivefold over the past two decades, reaching a record $33.2 billion in 2024 despite a muted dealmaking environment and investor liquidity constraints, according to Chronograph data cited by Ropes & Gray.
- • Ropes & Gray data shows 68% of single-asset, deal-by-deal co-investments completed since 2022 carried no management fee, and 63% were offered carry-free, while 49% of co-investments over the past three years incurred neither fees nor carry.
- • Private Fund CFO's Fees & Expenses Survey 2024 found over two-thirds of respondents charge no management fee on co-investment, and 42% charge no carry, with a further 39% charging reduced carry.
- • Deal-by-deal co-investment remains the most common structure, but GPs are increasingly evaluating committed co-investment programmes and dedicated vehicles such as overage, annex, pledge and flex funds to negotiate economics.
- • Larger co-investors that co-underwrite deals and seek board seats are challenging the traditionally passive co-investment model and making fee and carry charges harder to justify.
Summary
Co-investment is becoming a more formalised tool for general partners (GPs) and limited partners (LPs) alike, according to a Ropes & Gray LLP analysis. Activity has risen fivefold over the past two decades, reaching a record $33.2 billion in 2024 per Chronograph, even as dealmaking slowed and investor liquidity tightened. For GPs, co-investment offers flexibility to pursue high-potential deals while managing concentration limits, strengthens LP relationships, and provides equity for mid-life growth initiatives and acquisitions. Protracted fundraising and higher debt costs have also pushed GPs toward co-investors who can underwrite deals in advance, improving funding certainty.
For LPs, the principal draw is economics. Ropes & Gray data shows 68% of single-asset, deal-by-deal co-investments completed since 2022 incurred no management fee beyond a nominal administration charge in a few cases, and 63% were offered carry-free. Across the past three years, 49% of co-investments carried neither fees nor carry. Private Fund CFO's Fees & Expenses Survey 2024 reports similar patterns, with over two-thirds of respondents charging no management fee on co-investment and 42% charging no carry, while a further 39% apply reduced carry. Where fees are charged on direct co-investments from existing investors, they typically range from 0.75% to 1%, and carry typically runs 7.5% to 15%, below main-fund levels. Some investors reportedly devote up to 30% of their private equity allocation to co-investment, and LPs also gain greater control over deployment speed and diversification.
GPs bear costs when no fees are charged, since co-investment vehicles must still be audited, tax-filed and supported by books, records and financial statements. Private Fund CFO's survey indicates 70% of GPs usually or always structure co-investments as separate entities. GPs increasingly feel LPs benefit most from these arrangements and are seeking to negotiate economics more actively, which is prompting exploration of alternative structures.
Deal-by-deal co-investment remains the most common approach because of its flexibility on allocation size and timing. However, economics are negotiated case by case and often reduce the GP's leverage. Committed co-investment programmes, where investors commit upfront at the initial fundraise with vehicles formed for each deal, offer an alternative, though LPs may insist on integrated economics given the capital they must ringfence. Dedicated co-investment funds, typically charging fees and carry, include overage funds, annex funds, industry or region-specific funds, pledge funds and flex funds. Larger investors may also use cross-platform separate accounts, which typically generate some co-investment economics for the GP.
Ropes & Gray concludes there is no one-size-fits-all solution. Larger co-investors with dedicated capital are increasingly co-underwriting, conducting their own diligence and seeking governance rights and board seats, which makes charging economics more difficult. For less-resourced LPs, the firm suggests GPs can explore alternative approaches that preserve the mutual benefits of co-investment while securing a fairer share of the reward.
For LPs, the principal draw is economics. Ropes & Gray data shows 68% of single-asset, deal-by-deal co-investments completed since 2022 incurred no management fee beyond a nominal administration charge in a few cases, and 63% were offered carry-free. Across the past three years, 49% of co-investments carried neither fees nor carry. Private Fund CFO's Fees & Expenses Survey 2024 reports similar patterns, with over two-thirds of respondents charging no management fee on co-investment and 42% charging no carry, while a further 39% apply reduced carry. Where fees are charged on direct co-investments from existing investors, they typically range from 0.75% to 1%, and carry typically runs 7.5% to 15%, below main-fund levels. Some investors reportedly devote up to 30% of their private equity allocation to co-investment, and LPs also gain greater control over deployment speed and diversification.
GPs bear costs when no fees are charged, since co-investment vehicles must still be audited, tax-filed and supported by books, records and financial statements. Private Fund CFO's survey indicates 70% of GPs usually or always structure co-investments as separate entities. GPs increasingly feel LPs benefit most from these arrangements and are seeking to negotiate economics more actively, which is prompting exploration of alternative structures.
Deal-by-deal co-investment remains the most common approach because of its flexibility on allocation size and timing. However, economics are negotiated case by case and often reduce the GP's leverage. Committed co-investment programmes, where investors commit upfront at the initial fundraise with vehicles formed for each deal, offer an alternative, though LPs may insist on integrated economics given the capital they must ringfence. Dedicated co-investment funds, typically charging fees and carry, include overage funds, annex funds, industry or region-specific funds, pledge funds and flex funds. Larger investors may also use cross-platform separate accounts, which typically generate some co-investment economics for the GP.
Ropes & Gray concludes there is no one-size-fits-all solution. Larger co-investors with dedicated capital are increasingly co-underwriting, conducting their own diligence and seeking governance rights and board seats, which makes charging economics more difficult. For less-resourced LPs, the firm suggests GPs can explore alternative approaches that preserve the mutual benefits of co-investment while securing a fairer share of the reward.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.