Three Questions We Ask Before Any Co-Investment

1. Are Incentives Truly Aligned?

Many co-investments look appealing because of reduced or zero fees, but our first question is: “Why does the GP want a partner on this specific deal?” We look for situations where the GP is not simply de‑risking their fund, but increasing exposure to a high‑conviction asset.

• GP’s fund commitment and co-investment sizing relative to fund size.
• Whether the GP is offering economics that mirror their own exposure.
• How the opportunity was allocated across the flagship fund, parallel funds, and LPs.

2. Do We Have Real Governance?

We are comfortable being a minority investor, but we are not comfortable being a passenger. Practical governance—for example, information rights and consent on key actions—is far more important than theoretical protections buried in a side letter.

• Board representation or at least observer rights for significant transactions.
• Consent rights on leverage, recaps, related‑party transactions, and material amendments to shareholder agreements.
• Clear information packages and reporting timetables written into the documentation.

3. Is the Exit Pathway Clear?

Co-investments often concentrate risk in a single asset. Before we participate, we underwrite not just the entry valuation but at least two plausible exit routes, including the GP’s historical behavior around hold periods and exits.

• Base case and downside business plans with explicit exit assumptions and valuation ranges.
• Assessment of potential strategic buyers, sponsor‑to‑sponsor secondary, or IPO routes.
• Mechanics for forced sale, drag/tag rights, and timing misalignment between our horizon and the GP’s.

When these three questions are answered positively, fee savings become a genuine kicker rather than the main reason to do the deal.

How This Framework Is Used in Practice

Internally, every co-investment memo we write is structured around these pillars. It forces discipline: a transaction may be attractive on paper, but if we cannot articulate alignment, governance, and exits in a concise way, we are comfortable passing—even when other LPs are leaning in.

The outcome has been a concentrated co-investment book where each position is underwritten with the same rigor as a direct deal, and where our clients understand exactly why we chose to underwrite incremental exposure alongside specific GPs.