Equity co-investment

[2] Typically, co-investors are existing limited partners in an investment fund managed by the lead financial sponsor in a transaction.

As a result, many private equity firms offer co-investments to their largest and most important investors as an incentive to invest in future funds.

Most important of these is that co-investments allow a manager to make larger investments without either dedicating too much of the fund's capital to a single transaction (i.e., exposure issues) or sharing the deal with competing private equity firms.

Some drawbacks of co-investment include: a slow deal process, negative impacts on relationships with limited partners, as well as additional costs.

Susanna K. and David D. argue that social status and experience are two forms that co-investment opportunities rely on and can provide great limitations for deals to go through.