Co-investing alongside fund managers can be beneficial to private equity investors for a number of reasons. This investment strategy offers the LP a means of mitigating the J-curve effect and reducing the management fees associated with investing into primary vehicles. A significant 63% of all active private equity fund of funds managers currently tracked by Preqin’s Investor Intelligence online service have shown an interest in making co-investments as part of their investment strategy.
Over half (51%) of these private equity fund of funds managers are based within the US. Thirty-four percent of the remaining investors are headquartered in European countries, such as the UK, Switzerland, Luxembourg and France. The remaining 15% of private equity fund of funds managers in this sample are based in Asia and other countries around the world, such as Mexico, South Africa and Australia.
Of these investors, New York-based Neuberger Berman is the largest in size, with its $214bn assets under management representing 21% of aggregate total assets of all the private equity fund of funds managers with an interest in co-investment opportunities. The firm has previously raised a dedicated co-investment multi-manager fund, NB Co-Investment Partners II, which held a final close on $1.1bn in March 2013, and focuses on making buyout and growth investments alongside other private equity vehicles.
AlpInvest Partners is the second largest, with $50.1bn in assets under management, and has previously raised two dedicated co-investment multi-manager vehicles; AlpInvest Partners Later Stage Co-Invest and AlpInvest Co-Invest V. Australia-based IFM Investors is the third largest private equity fund of funds manager in this sample, with $41.6bn in total assets.