Co-investments have become increasingly popular in alternative funds, not just in Private Equity and Real Estate, but also in other liquid and illiquid alternative investment strategies, including alternative credit and activist funds. Co-investments allow investors to participate in individual investment opportunities in parallel with the regular fund structure and most often at lower fees. Co-investments are used when opportunities are too large to be (fully) allocated to the fund vehicle or exceed the investment restrictions of the fund.
The Standard Board’s Co-Investment Memo sets out the processes investment managers need to put in place to address key governance and compliance challenges that can arise when granting investors the right to co-invest. The memo also covers structuring considerations and issues in relation to fee, expense and cost allocation.