Private Equity Co-Investments: A Closer Look at an Evolving Landscape

Private equity co-investments have historically outperformed their parent funds, delivering a 2.11x net MOIC. However, this average masks significant dispersion; the spread between top and bottom performers is more than double that of parent funds. This indicates selectivity is paramount, as individual deal performance varies widely.

Our analysis challenges the notion that sector specialists consistently outperform generalists. Generalists actually showed slightly higher median returns with lower volatility. While specialists can achieve higher top-quartile results, their performance is more tied to sector dynamics, and the highest performing deals are split evenly between both types.

GP loss ratios are a better indicator of risk. Co-investing with GPs exhibiting low fund-level losses yields stronger, less volatile returns. Conversely, higher loss ratios signal greater unpredictability, with a more pronounced risk of investments falling below cost. Rigorous GP due diligence and broad sourcing capabilities are key to success, not just fee savings.