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In this series we have explored the challenges GPs face today across the full private equity lifecycle – fundraising, deployment and exits. The most adaptive private equity managers are those who are the most creative and strategic in partnering with their limited partners. In the always shifting GP/LP power equation, both are seeking trusted partners with whom they can build a long history of collaboration, transparency, and customization.
Co-investments have become one of the first stops for sponsors and their investors looking to collaborate and deepen their relationship. Increasingly GPs have equity co-investments as a permanent element of their operating model. In a recent Dechert survey of 100 private equity firms, 73% now offer a co-investment program.
It is a clear win-win. GPs can customize the deployment and portfolio construction of their funds -- particularly crucial in a limited exit world – juggling concentration risk and extending the deployment of their existing vintage. Likewise, LPs get access to advantaged deal flow in a highly cost-effective structure with the potential for outperformance. LPs can then see under the hood to gain deeper insights into how a GP thinks and invests...
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