Episode summary
Why Co-Investments Are Taking Over Private Equity
How I Invest With David Weisburd
· · 33 min · Hosts: David Weisburd · Guests: Rohan Parikh
Summary
Co-investments are being driven by a larger private equity market, slower blind-pool fundraising, slower distributions, and bigger deal sizes that force GPs to look for capital outside their core funds. Rohan Parikh said directs broadly were about $150 billion in 2021 and were trending well north of $300 billion annually in 2025, while co-investments alone were well north of $30 billion in 2024 and expected to surpass that in 2025.
He argued that LPs increasingly treat co-investments as a standalone private equity allocation, not just a fee-offsetting sidecar. The appeal is higher-conviction deal selection, better portfolio construction, and, in many cases, stronger alignment through lower fees, more transparency, and more governance than a blind pool fund. He also said independent sponsors are a major growth area because experienced deal professionals are spinning out, staying flexible, and using co-invest capital to build a track record.
The conversation focused heavily on underwriting. Parikh said the key questions are asset quality, sponsor quality, structure, valuation, and whether the deal is within the GP or sponsor’s strike zone. He also said the market has expanded from family offices and SBICs to pensions, endowments, sovereign wealth funds, and insurance companies, and that co-investments are becoming a necessary part of long-term GP-LP relationships.
Key takeaways
- Rohan Parikh said directs reached well north of $300 billion annually in 2025, with co-investments alone trending past $30 billion after a 2024 peak.
- Parikh said LPs increasingly view co-investments as a standalone asset class because they can optimize portfolio construction and seek higher-conviction deals.
- Parikh said independent sponsors are proliferating because blue-chip professionals can raise capital deal by deal without a blind pool fund.
- Parikh said the best co-invest opportunities usually combine strong deal quality, fair valuation, aligned GP commitment, and a sponsor with a credible track record.
- Parikh said the investor base has broadened from family offices and SBICs to endowments, pensions, sovereign wealth funds, and insurance companies.
- Parikh said co-investment relationships are becoming a long-term GP-LP currency, with the deal itself serving as the best form of underwriting and trust-building.
Notable quotes
“That market has experienced significant growth particularly over the last 5 years where it was in the 150 range back in 2021 and in 2025 trending well north of $300 billion annually”
“Co-investments are now really being seen as a standalone asset class within private equity”
“So, I think there is varying degrees of attractiveness across both those platforms”
“The co-investment space is very much relationship equitydriven from the perspective of a GP”
How the episode opens
Johan, you're at Hulahin Loki, which is a top boutique investment bank, and you focus on private equity co-investments. Why are there so many private equity co-investments happening in the market today? Taking a step back, it's helpful to frame this in the context of the market that co-investments are operating in.
When you look at equity co-investments, this sits broadly within what we call directs, which includes, you know, direct equity, but also co-investments. That market has experienced significant growth particularly over the last 5 years where it was in the 150 range back in 2021 and in 2025 trending well north of $300 billion annually. This is a market that's experiencing significant growth and has a lot of attention.
When you zoom into co-investments specifically, this is a market that is in 2024 did well north of 30 billion which was a peak and was trending to surpass in 2025. So continuing that momentum and definitely has a lot of attention. When you go into specific deal drivers for co-investment deal flow, I think there's three ways I think about that.
Markets, GPS, and LPs. On the market side, we've seen a very extended time horizon for blind pool fundraising. Many funds taking 18 to 24 months to close, particularly longer when you're a first-time emerging manager.
You couple that with extended time horizons for distributions, which is, you know, preventing LPs from committing again to blind funds. You have a lot of factors that are driving dealbydeal fundraising and dealbydeal execution. As funds have gotten larger, deals have also gotten larger.
So the requirement for capital outside of what their fund can support has also increased. That's driving a lot of co-investment flow even beyond what existing LPS that are in the funds can support. So you're seeing groups like us really benefit from that since we are working sidebyside with GPS who are looking to raise new third party co-invest capital.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private equity co-investments
- lp asset allocation
- fundraising cycles
- deal underwriting frameworks
- adverse selection
Companies and tickers mentioned
- C
- Houlihan Lokey
- PJT Park Hill
- Citi
- AlphaSense
Watch the episode
Watch “Why Co-Investments Are Taking Over Private Equity” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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