The benefits of a co-investment strategy

Private markets investment platform Titanbay

Co-investments are a natural complement to fund investments and provide a range of benefits for investors, including greater flexibility and control over capital deployment, higher return potential with earlier liquidity than fund investments, and much more. Private markets investment platform Titanbay are delighted to announce the launch of this programme and invite you to find out more here.

For private market investors looking to make single company investments, opportunities have never been greater. Co-investment funds attracted $20 billion in investor commitments last year, according to PitchBook data [1], as limited partners (LPs) seek access to assets that have the potential to yield higher returns at a lower cost. As many as two thirds of investors said they planned to make co-investments this year, according to Private Equity International’s LP Perspectives 2022 Study [2].

Co-investments effectively allow LPs to invest directly in companies alongside a general partner (GP)—either before an acquisition or after it is completed. Aside from the potentially chunkier returns on offer, co-investments provide earlier liquidity than traditional fund investments. Capital is also generally deployed almost immediately, which gives investors greater control over when their cash is put to work (as opposed to waiting for funds to drawdown their commitments).

Co-investment deals also give investors greater freedom to customise their investment strategies than a traditional fund might offer. For instance, a co-investment strategy might focus on specific sectors or geographies. Fee structures also tend to be more attractive for investors, with lower management fees and reduced carried interest when compared to a traditional private equity fund. In technical terms, this can reduce the ‘J-curve’—where returns tend to be negative in the early years of an investment before it matures. BlackRock estimates that a co-investment allocation of 20-30% can shorten the J-curve by 12 to 18 months [3].

While co-investments were previously generally only available to large institutional investors, co-investment programmes like Titanbay’s now give smaller investors access to the same opportunities, enabling them to increase the quality of their private market portfolios while also being able to take concentrated positions in select individual companies that they find compelling.

You can find more Titanbay insights here.

[1] Troutman

[2] Private Equity International

[3] Blackrock

The views, opinions and estimates expressed herein constitute personal judgments of certain members of the Titanbay Ltd. (Titanbay) team based on current market conditions and are subject to change without notice.  This information in no way constitutes Titanbay research and should not be treated as such. Titanbay does not make investment recommendations, and no communication, including this document, should be construed as a recommendation for any security offered on or off the Titanbay investment platform. The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production.

This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, investors should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment in private placements involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Past performance is not indicative of future results. Non-affiliated entities mentioned are for informational purposes only and should not be construed as an endorsement or sponsorship of Titanbay.

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