PE Co-Invest ELI5?

HL, Harbourvest, AlpInvest, RCP, etc. (tons of FoFs, family offices and institutional investors out there) essentially act as both an LP and an active co-investor. LP co-invest is just a fund or non fund investor, investing behind a lead sponsor in a transaction. It can also mean multiple sponsors clubbing together but I believe you’re referring to LP co-invest. The LP relationship gives you more sway to essentially use it as a bargaining piece to get fee free or reduced fee co-invest, which enhances returns to their investors. Now these FoFs will also pitch their value add, expertise, ability to connect you with their knowledge relationships, but at the end of the day they’re a silent investor. May have a board seat (more likely board observer) as well. You’ll receive IC materials, model, maybe cleaned up data cuts but they are not as in the weeds and they aren’t involved in 3P diligence outside of receiving the reports. This allows GPs to write bigger equity checks than they otherwise might be able to, but make no mistake, the larger LP check you write, the more opportunities you’ll see. This is why, contrary to what I’ve seen before on this forum, you’ll rarely see a firm that just co-invests.