For an investor who wants more say in where capital goes, co-investment sits between committing to a fund and sourcing deals directly. The investor backs a manager whose thesis the investor trusts, then decides deal by deal where to invest more, often at reduced or no fees. LPs are leaning in: 44% say co-investment is becoming more important to their investment decisions, and co-investments have averaged higher returns than the funds that offered them.
The same research shows the trade-off. Co-investment results vary far more from deal to deal than fund results do, so the return depends on how well each opportunity is underwritten. That matters most with emerging managers, where track records are shorter. About one-third now seed their funds with deals, and fundraises have stretched to roughly 16 months from first to final close, which gives investors time to underwrite real portfolio companies before they commit.
Background
Four Ways Investors Co-Invest
- 01
Alongside the fund
A manager offers part of the equity in one portfolio company to its LPs, often with reduced or no management fee and carry.
- 02
Co-underwriting
The investor takes part in diligence and structuring with the manager before the deal closes.
- 03
Syndicated
The manager places part of the equity with several outside investors as the deal closes.
- 04
Expansion capital
The investor joins after the initial acquisition, in a company the manager already owns.
Structures adapted from Coller EQT’s Global Private Capital Barometer, Winter 2025-26. Names and descriptions are HalBar’s.
Market Perspectives
What the 2026 Research Shows
Co-investment is gaining importance. The results depend on the underwriting behind each deal.
Industry Report
Global Private Capital Barometer, Winter 2025-26: Co-Investments
In Coller EQT’s LP survey, 44% say co-investments are becoming more important to their investment decisions and 4% say less. More than three-quarters name fee rebalancing as a major reason to co-invest and 71% cite access to attractive opportunities, while 19% say co-investment is growing in importance for them but they lack enough opportunities. Coller reads the results as access influencing which funds LPs back.
Coller EQT · Jan 2026
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Research
Private Equity Co-Investments: A Closer Look at an Evolving Landscape
Goldman Sachs Asset Management reviewed 236 buyout co-investment opportunities from 135 managers (2015 to 2022). Co-investments averaged a 2.11x net multiple against 1.80x for the parent funds, and 58% beat their parent fund. The spread between the 25th and 75th percentiles was more than double that of the funds. GSAM links strong programs to resources, expertise, selectivity, and thorough GP evaluation.
Goldman Sachs Asset Management · Sep 2026
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Market Perspective
Emerging Managers in Private Equity: An Overlooked Source of Alpha in the U.S. Middle Market
Churchill Asset Management reports a median net IRR of 18.9% for emerging managers (funds I to III under $1 billion), against 15.8% and 15.1% for established managers below and above $1 billion, using Preqin North American buyout data for 2011 to 2021. Limited track records and leaner teams make these managers harder to diligence. Churchill notes that about one-third now use a seeded portfolio, so investors can underwrite actual deals rather than a blind pool, and that first-to-final close now averages 16 months.
Churchill Asset Management · Sep 2026
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From HalBar
Manager selection is not a screen applied after the thesis. It is the thesis.
“For allocators, the sharper question is who is selecting the business, who is underwriting the operator, and who has the discipline to walk away when the leadership fit is not right.”
Nate Wasson, HalBar Partners · LinkedIn · Jul 2026
Read on LinkedIn →One Question
How Co-Investments Get Underwritten
When a manager offers you a co-investment, how do you typically underwrite it?
Responses are anonymous and will be compiled in HalBar’s year-end survey of the industry.
