Which of the following is a common method of enhancing investor alignment in private equity firms?

Co-investment opportunities for fund managers are a common method of enhancing investor alignment in private equity firms because they allow fund managers to invest alongside their investors in specific deals. This creates a strong alignment of interests since both the managers and the investors share in the risks and rewards of the investment. By having skin in the game, fund managers are incentivized to make decisions that are in the best interest of the investors, thus fostering a collaborative and trust-based relationship.

The other options do not effectively promote alignment. Increasing management fees could potentially create a disconnect between the interests of the fund managers and investors, as higher fees might incentivize managers to focus on short-term gains rather than long-term value. Short-term investment horizons typically do not align with the nature of private equity investments, which often thrive on longer-term strategies for generating value. Serving diverse investor types may help broaden a fund's capital base but does not inherently improve alignment; in fact, differing priorities among various types of investors could complicate decision-making and alignment of interests.