Co-Investment
Private Equity glossary · Private Equity Fundamentals
Definition
A direct investment by an LP alongside a GP into a specific portfolio-company transaction, typically on reduced or zero management fee and zero carry — a significant source of net-return uplift for LPs willing to execute the underwriting work on a deal-by-deal basis. Standard PE allocation increasingly mixes ~75% primary fund commitments, ~15% secondaries (LP-led and GP-led), and ~10-15% co-investments. Co-invest rights are negotiated in the LPA or side letter; large/strategic LPs (CalPERS, Harvard, GIC) command priority allocation, while smaller LPs receive co-invest opportunistically. Co-invest underwriting decisions are time-pressured (typically 2-4 weeks from offer to commitment).
Co-Investment in plain English
Normally an investor (an LP, or 'limited partner') hands money to a fund manager (the GP, or 'general partner') who spreads it across many deals and charges hefty fees for doing so. A co-investment is when that investor puts extra money directly into ONE specific deal alongside the manager — usually paying little or no fee — which meaningfully boosts their net returns because they skip the toll booth. The catch: they have to do their own homework fast (often just 2-4 weeks to decide), and the best opportunities go to the biggest, most trusted investors like CalPERS or Harvard. Today a typical PE portfolio mixes roughly 75% regular fund commitments, ~15% 'secondaries' (buying existing stakes from other investors), and ~10-15% co-investments.
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