Co-investment: definition, how it works and risks

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Co-investment involves investing directly in a company alongside a private equity fund, rather than accessing it solely through the fund. Long reserved for institutional investors already committed to a vehicle, it has established itself over the past twenty years as a fully-fledged route into private equity, with generally lower fees but well-identified risks.

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What is co-investment?

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Co-investment is a transaction in which several investors jointly finance the acquisition of the same company. In private equity, the most common configuration is as follows: an asset management firm identifies a target, takes the primary stake through its fund, and offers certain investors the opportunity to contribute additional capital directly into the transaction. The co-investor then holds a stake, most often a minority one, in the company itself, and not simply a share in the fund.

Co-investor, General Partner, Limited Partner: who does what

The General Partner (GP) is the asset management firm: it sources the transaction, negotiates, takes control of the asset and manages it through to exit. The Limited Partner (LP) is the fund investor, whether a pension fund, insurer, asset manager, family office or pooled vehicle for retail investors. The co-investor is an LP, or more rarely a third party, who contributes additional capital on a specific transaction.

What co-investment is not

It is not a fund: the co-investor selects an identified transaction, not a portfolio to be built. It is not a club deal, which is typically initiated by a private circle of business angels or a family office, outside an approved asset management firm. And it is not secondary: private equity secondary involves buying stakes in existing funds, not entering the capital of a company alongside a manager.

How co-investment works in private equity

1. Sourcing. The GP identifies a target, most often in the context of an LBO, and negotiates the terms of the transaction.
2. Sizing. The amount exceeds what the fund can or wishes to commit alone, due to concentration limits set out in its regulations.
3. Invitation. The GP offers the additional capital to certain LPs, selected for their ability to decide quickly and analyse a file.
4. Due diligence. The co-investor conducts its own checks, within a timeframe constrained by the transaction calendar.
5. Structuring. The capital is pooled in an SPV (Special Purpose Vehicle), a company created specifically to carry the transaction: co-investors hold shares in the SPV, which holds the stake. This structure centralises management, distributes rights among participants and facilitates the distribution of disposal proceeds.
6. Exit. The co-investor exits at the same time as the fund, upon the sale of the company or a distribution.

This is the deal-by-deal principle, and the most structurally significant difference from a conventional fund. By subscribing to a fund, an investor places trust in a strategy and a team, not a list of assets. In co-investment, they know the company, its sector, its valuation and the investment thesis before making a decision. This visibility allows for greater selectivity, but also transfers part of the analytical responsibility to the co-investor.

Why private equity funds open up co-investments

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Four reasons, more mechanical than generous. Transaction sizes increase as private markets mature, pushing managers towards co-investors to finance their largest operations. A fund's regulations then cap the share of the portfolio that a single line can represent: beyond that threshold, the additional capital must come from elsewhere. A co-investor capable of conducting due diligence in a few weeks also secures a closing within a competitive timeline. Finally, offering co-investments has become a fundraising argument that retains LPs from one vintage to the next. The segment follows the growth of the underlying market: French private equity invested €36.4 billion in 2,904 companies and infrastructure projects in 2025, for €42.9 billion raised.

Source: France Invest / Grant Thornton, "Étude d'activité 2025 du capital-investissement français" (March 2026), https://www.franceinvest.eu.

The advantages of co-investment

Lower fees. Management fees and carried interest are reduced or waived on the co-invested portion. Over a seven to ten-year horizon, the gap translates into a significant difference in net performance, a mechanism we detail in our article on private equity fees. The AMF notes that the level and structure of fees are among the first points to examine before any subscription in unlisted assets.

Access to otherwise closed transactions. Co-investment provides access to transactions negotiated by leading teams, in companies that are neither listed nor open to individual investors acting alone.

Deliberate diversification. A well-constructed programme allows voluntary diversification across managers, sectors, strategies and geographies, from lower mid-cap to large cap, where a single fund remains constrained by its mandate.

More direct engagement. Holding a direct stake allows closer dialogue with the company, particularly on environmental, social and governance matters.

The risks and limits of co-investment

Co-investment is not an improved version of the fund: it is a different risk profile.

Concentration. A co-investment is one company. Where a fund spreads risk across fifteen to twenty-five holdings, the co-investor bears the entirety of the risk of a single asset. This risk can only be managed by multiplying transactions, which requires significant investment capacity.

Selection bias. The manager decides what it shares. Without independent analytical capacity, a co-investor risks receiving primarily the files that the fund does not wish to carry alone.

Time pressure. Decision windows are short, often a matter of weeks. Conducting serious due diligence within that timeframe requires dedicated teams and well-established processes.

Illiquidity. Capital is locked in until exit, with no daily valuation or organised resale. This constraint can become an advantage when the horizon is genuinely long, a point developed in our article on illiquidity in private equity.

Performance dispersion. The gap between the best and worst transactions is far wider than in listed markets. As a benchmark, French private equity delivers a net IRR of 11.3% per year since inception and 12.4% over ten years, compared to 8.9% for the CAC 40 over the same period: this is an asset class average, not an expected return on an isolated transaction. See our analysis of private equity returns.

Source: France Invest / EY, "Net performance of French private equity to end 2024" (31st edition, July 2025), https://www.franceinvest.eu.

Co-investment carries a risk of capital loss up to the full amount invested in a transaction, and past performance does not guarantee future results. This approach must remain a diversification pocket within a broader portfolio.

Co-investment, primary fund, secondary, club deal: the differences

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Indicative comparison. Characteristics vary by vehicle and manager. All investment in unlisted assets carries a risk of capital loss.

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How to access co-investment as a retail investor

Historically, only investors already committed to a fund and capable of mobilising significant amounts within a short timeframe are offered co-investment opportunities. A retail investor mechanically has neither the access, nor the deal flow, nor the due diligence teams required.

Pooling changes this equation: subscriptions from multiple retail investors are aggregated within an FPCI (Fonds Professionnel de Capital Investissement) combined with an SPV, which then invests in the target strategies and vehicles. The entry threshold is significantly lowered compared to a direct subscription, with the minimum amount varying depending on the strategy open for fundraising.

At Fundora, the strategies offered are backed by funds in the global top 25%, with target multiples of 2.5x to 4x that do not constitute guaranteed returns, and cover secondary, LBO, technology and AI venture, cybersecurity, semiconductors and private debt. Investment is made within a managed mandate framework, with effective management provided by Kyoseil Asset Management, an AMF-approved portfolio management company under number GP-99040. To go further, see our guide to investing in private equity.

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FAQ: co-investment

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What is co-investment?

‍It is a transaction in which several investors jointly finance the acquisition of the same company. In private equity, an investor contributes capital directly into a company alongside the fund leading the transaction, rather than accessing it solely through that fund. They then hold a stake, most often a minority one, in the company itself.

What is a co-investor?

‍It is the investor who contributes this additional capital, typically a Limited Partner of the fund: a pension fund, insurer, asset manager, sovereign wealth fund, family office or pooled vehicle for retail investors. They do not lead the transaction: it is the General Partner, the asset management firm, that runs and manages it through to exit.

What are the risks associated with co-investment?

‍Four main risks: concentration, as each transaction involves a single asset with no pooling; selection bias, since the manager decides which files it shares; time pressure, with short decision windows that limit the depth of analysis; and illiquidity, with capital locked in until exit. Added to this is greater performance dispersion than in listed markets, with a risk of capital loss up to the full amount invested.

What is the difference between co-investment and a club deal?

‍Co-investment relies on an institutional manager, often an approved asset management firm, that has negotiated and leads the transaction. A club deal is typically initiated by a private circle of business angels or a family office, outside an approved asset manager. The difference lies in the origin of the transaction, the level of regulatory oversight and the quality of the due diligence conducted upfront.

Can a retail investor co-invest, and from what amount?

‍Not directly under institutional market conditions, which require a prior commitment to a fund and the ability to make rapid decisions on amounts running into hundreds of thousands or even millions of euros. Access is through pooled vehicles, in which subscriptions from multiple investors are aggregated within an FPCI combined with an SPV, with management provided by an AMF-approved asset manager. The minimum amount is then significantly lower and depends on the strategy open for fundraising.