Preqin’s Investor Intelligence online service currently tracks 330 active private equity fund of funds managers, 226 (68%) of which have an interest in co-investment opportunities. Co-investments are attractive to investors as they mitigate the effect of the J-curve, and can generate returns quicker than primary fund investments. They also typically come with favourable fee structures for LPs, another motivation for investors to utilize them as part of their investment strategies. Fund of funds managers account for 14% of the total co-investor universe, only behind public pension funds (23%) and private sector pension funds (19%).
Of the 226 private equity fund of funds managers that are interested in co-investment opportunities, 48% are US based. Thirty-seven percent are Europe based, with the UK (25% of Europe-based investors) best represented in this region, followed by Switzerland (19%) and France (12%). The remaining 15% of managers are based in regions outside the traditional geographies, in regions with less mature private equity industries, such as Asia, Australasia and Africa.
The largest Europe-based private equity fund of funds manager with a preference for co-investments, Ardian, is headquartered in Paris and has $50bn in assets under management (AUM). Ardian has previously raised a co-investment fund, AXA Co-investment Fund II, which held a final close on €401mn in May 2006. The vehicle seeks co-investment opportunities in diversified industries within Europe.
Another significant fund of funds manager with co-investing preferences is AlpInvest Partners, with $47bn in AUM. AlpInvest Partners gains exposure to private equity through primary, secondary and co-investment opportunities. The firm has raised two dedicated co-investment multi-manager vehicles: AlpInvest Partners Later Stage Co-Invest and AlpInvest Co-Invest V. AlpInvest Co-Invest V held a final close on €1.2bn in December 2012.
The largest private equity fund of funds manager outside the traditional geographies is Asia Alternatives Management, operating with AUM of $6.5bn. The firm primarily targets co-investment opportunities alongside growth and mid-market buyout fund managers, and also considers attractive special situations and distressed debt private equity prospects.