Key Takeaways
- • Co-investment funds raised a record $47.3 billion in 2024, the highest annual total on record according to PitchBook's Q1 2026 Global Private Market Fundraising Report, despite broader PE fundraising headwinds.
- • Unlike traditional direct co-investments structured as fee-free vehicles, these new co-investment funds charge both management fees and carried interest, signaling a fundamental shift in LP appetite and sponsor strategy.
- • Strong demand for co-investment opportunities has enabled sponsors to charge fees on committed co-investment vehicles, reversing the historical fee-free model that differentiated co-investments from traditional fund structures.
- • California State Teachers' Retirement System demonstrated the viability of the fee-free co-investment model, reporting over $550 million in savings through its Collaborative Model approach as of 2024.
- • The record fundraising suggests institutional investors have concluded that fee-free co-investment models, while successful for mega-institutions, are not universally applicable across the LP universe.
Summary
Co-investment funds achieved record fundraising in 2024, raising $47.3 billion and establishing a new market benchmark even as broader private equity fundraising and dealmaking activity has contracted. This counterintuitive strength reflects structural shifts in how sponsors and limited partners are approaching co-investment opportunities in a challenging capital deployment environment.
The most significant development underlying this record is the emergence of co-investment funds that charge management fees and carried interest—a departure from the traditional co-investment model that has historically been structured as fee-free vehicles. These comingled co-investment funds invest directly alongside general partners but incorporate fee structures more similar to traditional PE funds, creating a hybrid category that has attracted substantial capital. According to Cassie Kimmelman, a partner in Weil's private funds practice, sponsors are now "dedicating resources to committed co-investment vehicles where there's more demand and, therefore, they can ask for fees and carry because of the way the market is going."
The record capital raise reflects two competing dynamics in the LP community. On one hand, mega-institutions like California State Teachers' Retirement System have demonstrated the economic benefits of fee-free co-investment strategies, reporting over $550 million in cumulative savings through its Collaborative Model as of 2024, which combines co-investments, internally managed assets, and separately managed accounts. On the other hand, the surge in fee-bearing co-investment fund fundraising indicates that many institutional investors—particularly mid-sized and smaller LPs—have concluded that the fee-free co-investment model that has worked for the largest institutions may not be operationally or economically viable for their organizations.
The strong demand for co-investment opportunities remains evident despite headwinds in broader PE markets, suggesting LPs view direct deal access as a strategic priority even when structured through fee-bearing vehicles. This positioning allows sponsors to capture economics on co-investment allocations while offering LPs the perceived benefits of direct company exposure and potential diversification from traditional fund structures.
The most significant development underlying this record is the emergence of co-investment funds that charge management fees and carried interest—a departure from the traditional co-investment model that has historically been structured as fee-free vehicles. These comingled co-investment funds invest directly alongside general partners but incorporate fee structures more similar to traditional PE funds, creating a hybrid category that has attracted substantial capital. According to Cassie Kimmelman, a partner in Weil's private funds practice, sponsors are now "dedicating resources to committed co-investment vehicles where there's more demand and, therefore, they can ask for fees and carry because of the way the market is going."
The record capital raise reflects two competing dynamics in the LP community. On one hand, mega-institutions like California State Teachers' Retirement System have demonstrated the economic benefits of fee-free co-investment strategies, reporting over $550 million in cumulative savings through its Collaborative Model as of 2024, which combines co-investments, internally managed assets, and separately managed accounts. On the other hand, the surge in fee-bearing co-investment fund fundraising indicates that many institutional investors—particularly mid-sized and smaller LPs—have concluded that the fee-free co-investment model that has worked for the largest institutions may not be operationally or economically viable for their organizations.
The strong demand for co-investment opportunities remains evident despite headwinds in broader PE markets, suggesting LPs view direct deal access as a strategic priority even when structured through fee-bearing vehicles. This positioning allows sponsors to capture economics on co-investment allocations while offering LPs the perceived benefits of direct company exposure and potential diversification from traditional fund structures.
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