Interest in co-investment opportunities has increased over the years due to investor demands for lower-cost investments and the need of fund sponsors to differentiate themselves from other private equity firms. As institutional and other fund investors (including high-net-worth individuals and family offices) become more sophisticated in evaluating private investment opportunities, they are seeking co-investment rights as a condition of their investment in private equity funds, and as a way to access more private equity investments while leveraging the costs that they are already paying to fund sponsors. Given the competitive landscape for private equity investments and the challenges of fund-raising, fund sponsors see co-investment opportunities as a means to secure investor commitments, recruit operating partners, and develop relationships with other private equity firms (PE Firms).

This paper addresses the practical issues and the legal, economic and governance considerations for successful co-investments.