HarbourVest Partners and Ropes & Gray Discuss Commercial and Legal Considerations for the Savvy Investor Poised to Take on the Co-Investment Market

Co-investment, a sub-asset class of private equity, has grown nearly tenfold since its nascency in the early 2000s. Driven by the efficient and diversified access to top-quartile private equity opportunities and the ability to deepen relationships with general partners (GPs), opportunities for the savvy investor are ample, and investors need to get smart on the many commercial, legal and advisory considerations.

In a Q&A with Private Equity International, Ropes & Gray counsel Mike Gilbert and HarbourVest Partners Managing Director Seth Palmer provide guidance on navigating the co-investment market.

“It is crucial to be intentional and practical when designing a co-investment program,” said Seth. “This means being thoughtful about your objectives and your GP relationships, and being realistic in terms of your internal resources and processes” adds Seth.

From a legal perspective, Mike says, “Given the growth of the asset class, we see agreements and structures becoming very similar to traditional fund investment terms. There are advantages and pitfalls as a result.” The familiarity can reduce barriers, added Mike. “The absence of the right legal protections, however, can risk misalignment with the GP’s primary funds, particularly around the terms and timing of liquidity rights.” 

In the full article Ropes & Gray and HarbourVest Partners underscore the importance of being prepared for rapid investment opportunities as they forecast a return to liquidity and increased investment opportunities.