Does Your PE Fund Let You Co-Invest?
Hi all,
It's been a minute. I wanted to know if your PE fund let's you co-invest and at what level they typically allow this? The Analyst level? Post-MBA Associate? Etc.
Every time I mention co-investing and private equity people assume I am referring to LPs, and that's an entirely different story.
Would really appreciate your input. Even if you are not 100%, let me know what you've heard.
Thanks!
From my personal experience, PE fund would allow you to invest at the management company level - for VP and above level. Most GP (including the senior members of the fund management team) is expected to put in 5-10% of the fund size with their own money. For co-investing, I think as long as other LPs are fine - shouldn't be a problem. However, I have seen co-investing mostly in real estate deals with smaller funds - rather than a generalist fund with large fund size with more brand named GPs.
Middle market firm (~1ish Billion Fund). Associates allowed up to $250,000 co-invest with a line of credit to cover 75% of the capital calls. That $250k was your % of the total fund so to co-invest it all you would have to be around for life of the fund investment period. Most associate would end up co-investing ~100-150K over their 2-year roll.
So with 25K of initial capital I could coinvest 100k?
I Just took a DNA test turns out I'm 100% levered tf up
Please let me know if I am interpreting this thread correctly.
PE employees are co-investing in their funds by taking out personal lines of credit? If true, it reaffirms my bubble thesis.
If only there was easy way to short private equity. The illiquidity premium may live on for a while. Unsophisticated LPs (pensions) love mark-to-model accounting, and the illusionary smooth returns.
How would PE employees co-investing in their own deals with personal lines of credit signal a bubble?
If anything, it affirms their confidence in the deals they are doing. I'd be worried if the people doing the deals DIDNT want to participate.
Couple of blue chip large cap funds have a programme that lets you end up with $200-300k investment over a 2-year programme, with leverage ranging from 0% (only a one-year advance on the bonus on a rolling basis) to 75% @ ~4.5% (not the best interest rate).
People commit either an amount within an eligible range to the fund and receive pro-rata capital calls everytime the fund issues / LPs receive a call, or at other funds commit a fixed absolute amount ($10k, $20k, $30k) per investment - in the former scenario the private portfolio distribution / diversification would match the fund's (i.e. large deals = large exposure), in the latter the personal portfolio distribution would differ from the fund's (largely a good thing, as small deals tend to outperform larger ones).
In addition, some funds issue "shadow" co-investment / equity, which vests over a couple of years and effectively is a non-recourse interest-free loan (e.g. $75k shadow co-investment makes 3x, associate gets 2x proceeds but repays the principal; if it makes