A co-investment vehicle is a special purpose vehicle formed to allow select investors to invest additional capital alongside the main fund in a specific deal. Co-investment is offered on top of, not instead of, the investor's existing fund commitment.
Why It Matters
Co-investment rights are one of the most requested terms in fund negotiations. Offering co-invest strengthens LP relationships, lets you write larger checks on high-conviction deals, and serves as a competitive advantage in fundraising. But each co-investment vehicle is a separate entity with its own formation documents, regulatory filings, and ongoing administration.
Key Details
- Typically structured as a standalone LLC formed for a single transaction.
- Offered to existing LPs, sometimes with a right of first refusal granted through side letters.
- Usually carries no management fee and reduced or zero carried interest, which is a major draw for LPs.
- Requires a separate Form D filing with the SEC and separate K-1 preparation for each investor at tax time.
- The allocation methodology for who receives co-invest opportunities must be documented and consistently applied to avoid favoritism claims.
For more on structuring and administering co-investments, see Co-Investment Vehicles.
Capital Company handles co-investment vehicle formation, regulatory filings, and investor reporting as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.