Co-investment rights allow limited partners to invest directly in specific deals alongside the fund, in addition to their LP commitment. Co-investments are attractive to LPs because they usually carry reduced management fees and zero carried interest, lowering the effective cost of capital deployment.
For GPs, offering co-investment rights is a powerful LP relations tool and allows funds to pursue larger transactions than their committed capital would otherwise allow. Co-investments are especially prevalent in buyout and growth equity transactions in Australia and Southeast Asia, where ticket sizes can exceed a single fund's concentration limits.