Co-investments strengthen GP-LP bond - AVCJ Forum

Sandra Bosela, the managing director and global head of private equity at Optrust Private Markets Group, said that while co-investment has become a common component of private equity deals, not all LPs are capable of executing on those intentions. GPs will quickly learn which investors can follow through on their demands and which cannot.

"You ask every GP, there are a handful of LPs who say they want it and will never execute. And the GPs will very quickly put them to the side," Bosela said. "The LPs who show that, yes, they can actually do it, are the ones that are going to get the calls over and over."

The trust-building can also work on the LP side, as investors become more willing to deal with funds that can be flexible enough to allow them into the deal process. Steve Byrom, the head of private equity for Future Fund, attributed the growth of interest in co-investment to the realization of the changing realities of the market.

"I think there's an underlying message in that, and that's that in this low return environment, the economics on the fund don't work. And I think that's what the LP community is selling to the GP community by demanding more co-investment opportunities," said Byrom.

Not all co-investments have to come from existing GP-LP relationships, though the LPs said that this is the most likely source.

Ivan Vercoutere, managing partner and CIO at LGT Capital Partners, said that an LP might reject an investment opportunity in a GP's fund, but still retain interest in working with the manager on a one-off basis, if the offer is attractive enough. Vercoutere said about 10-20% of LGT's coinvestments are set up this way.

The AVCJ Forum is being held in Hong Kong from November 3-5. For more information, please go to www.avcjforum.com.

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• Topics
• LPs
• GPs
• Investments
• LPs
• GPs
• AVCJ Private Equity & Venture Forum
• Future Fund
• LGT Capital Partners
• Co-investment