What is meant by 'co-investment' in the context of private equity?

Co-investment in the context of private equity refers to the opportunity for investors to make direct investments alongside a private equity fund in specific deals or transactions. This arrangement allows limited partners or other investors to participate in investment opportunities beyond their initial fund commitments.

When an investor co-invests, they typically do so on a deal-by-deal basis, which enables them to increase their exposure to particular investments that align with their investment strategy. Co-investments can also be attractive as they often come with reduced fees compared to traditional fund investments and allow investors to have more control over their investment decisions.

This model can be particularly beneficial for both private equity firms and investors. Private equity firms can raise additional capital for specific investments without diluting their fund's performance or capital structure, while co-investors gain access to exclusive opportunities that might not be available to them through other channels.

Understanding co-investment is essential for navigating the private equity landscape, as it represents a significant aspect of how funds and their investors operate in conjunction with one another, enhancing partnership dynamics and investment outcomes.