The Investment Strategy That’s Reshaping Private Equity

In special equity, the most intelligent general partners (GPS) co-chairs are not only a fundraising sweetener; They are a strategic arm. Truly, they strengthen their portfolio, deepen LP relations and reduce the general risk exposure. Still many GPS are still engaged in joint investment, not the main element of the stock strategy.

In today’s climate, the LPS is more voter, the underwriting standards are higher and it is difficult to gain confidence, but also the GPS, which is highly played by the package of investments, can be an outsider. The most advanced firms only use joint investment to build solid portfolios and solid LP alignment, not just to raise capital.

Related: Cooperation between limited partners and growth partners: the prospects of investors

Why do his colleague invest more than ever

In the last ten years, the joint investment market has grown rapidly. According to the Global Private Capital Report, about 70% of the LP, now waiting for the opportunities for their fund managers. This requirement is no longer limited to mega institutional family offices. Sovereign Wealth Funds and smaller foundations are looking for ways to increase ways to improve direct transactions while reducing the mixed payment structures.

Meanwhile, a report in 2023, stressed that the joint investment increases in variable markets, more controls, low fees and quality transactions are looking for deeper access to LPs.

For GPS, it offers both a problem and an opportunity. Challenge: Joint investment can lead to internal resources and slow transactions if they are not well-managed. Opportunity, when the fund has been included in the operations and strategy since the first day, the co-chairs increase the relief of the portfolio and reduce the risk of concentration, reduces the risk of concentration without reducing the stock management.

Investment as a means for the portfolio construction

Smart GPS treates investment capacity as part of the pile of capital, not separately, but also. This mentality allows them:

• Continue larger deals The stock level can support, without increasing concentration at the stock level.

• Add Diversification By allocating stock capital to basic positions and co-chairing investors in neighboring or higher risk assets.

• To move rapidly LPS can invest with short notice on opportunistic deals by previously selected LPS.

Let’s say that the $ 100 million fund is aimed at $ 10 million in $ 10 million. To get a $ 25 million dollar in accordance with the thesis, but get a $ 25 million overcooking your exposure cover. You can still finance $ 10 million from the Fund, financing $ 10 million from the Fund and financing $ 15 million from the Fund. This approach protects the portfolio balance while LPS directly access direct access to an asset.

More importantly, it builds your reputation like a GP that brings access not only capital, not only.

For a work research of this dynamic, this piece from Hamilton Lane shows how to make the jubine into a modern private market strategy.

Related: Direct investment risks and rewards for LPS

To reduce the risk while increasing possession

CO-Investment allows one to control how to control high-trial assets that do not exceed GPS’s main fund. In many cases, the most attractive deals are the most capital-intensive. Without Co-investment partners, a GP should choose between a smaller slice or the fund.

By bringing to co-investors, GPS can provide majority or lead positions while remain careful. It improves management management, time and value plans to reduce all critical arms.

In addition, the joint investment can be a powerful tool that navigates in market periods. During the awkward, GPS still deletes the seeds with the syndyky, choosing capital-heavy deals to protect dry powder, while still posting on discounted opportunities. Private capital guide of BVCA’s Private Capital Guide offers the views of the co-chairs of companies during the company.

Operating support of joint investment strategy

Of course, the offer of the co-chairs does not apply to the flow of bargaining only. GPS, which is superior to this, set up internal systems to manage:

• Legal structure: Quick SPV installation, separation mechanics and clear management roles

• LPE segmentation: To understand which investors have appetite, capacity and decision-making speed

• Information exchange: Reliable, real-time access to voting, effort and investment report

• Compatibility and fairness: Ensuring transparent disconnection of the main fund

The difference between firms that often offer this operating support often “can” make a difference between the companies and consistently clean, clean, clean and scale.

For GPS, Carta and Juniper Square, Carta and Juniper Square simplify the LP communication and investor, for GPS, who want to train their funds.

More advanced GPS, subscription documents or automated investors use tools such as Passthrough to facilitate subscription documents or the goodbye.

Co-investment is continuous confidence

We see it as a way to show you both in terms of an LP point of view, but to show investment, confidence and alignment. It says more, more refunds and is often a bigger role in the table. When it is done enough, it turns your investors into what they are – complete partners. In a world, which is more attentive in terms of fundraising, the GPS preference is based on consistent, thoughtful chairs.

• Keep the best LPs in future funds.

• Circle one-time investors into anchor obligations.

• Earn allocations during competitive stock collection periods.

According to the 2023 LP study of Harbourvest, 80% of the LP, especially in the transparent information and transparent information, and more than 8% of the managers who offer investment entry reported more than satisfaction and confidence.

Related: Direct investments are growing by LPS

WORTHING NOTE: Don’t overwhelm

Investment with all the advantages is not a silver bullet. When used excessive or weak, it can cause execution, inefficiency and bring LPs to confront. The most common deficiencies:

• To provide a lot of co-chairs by devaluating their qualities

• To provide funds by allocation

• Closing from side bargain logistics

• Unable to connect the internal bandwidth to manage complexity

The best firms are selective. They set the LPS early, often in PPM or DDQ and pay attention to quality of quantity. A great connection that gives a victory can be stronger than five who do not exit.

The co-chairs are no longer optional; It is a certain feature of modern private equity. But the edge does not come without presenting them. Portfolio stems from integrating portfolio construction, risk management and LP strategy.

The smartest GPS knows that. They use joint investment not only to fill a lid table, but not to unlock long-term lp relationships, risky large bets and operational agility. As soon as the fundraising looks more demanding from competitive and LP’s managers, they will receive investments as a last-minute offer, but a core fund.