A new report by CEPRES based on analysis of private equity of almost 4,000 private equity co-investments carried out over the last 17 years, has revealed a 20-fold increase in the number of deals in that period.
The report details the returns generated across different regions, market segments and stages including Buyout, Venture, Private Debt and Real Assets. The analysis was done in PE.Analyzer and compared Co-Investment outcomes versus 40,000 direct GP deals across 4,089 funds covering some USD15.5 trillion of private investments. The analysis shows the massive growth in use of Co-Investment strategies and their outcomes across different market segments.
A total of 3,959 Co-Investments were analysed accounting for USD69.4 billion of Co-Investment capital.
The report reveals that due to easier access, most Co-Investments are made in Companies valued over USD1 billion. There is more restricted access to co-investments opportunities in small and mid-cap segments, however, selected niche segments perform better for Co-Investments.
On average co-investments deliver better money multiples (TVPI) than IRR returns.
“Co-Investments have become a very popular tool for institutional investors to hedge their portfolio exposure to different market segments and to reduce the impact of fees and carry,” says Christopher Godfrey, President CEPRES Corp. “They are an effective tool, but this analysis shows investors need to be targeted and selective to ensure they get the outcomes they expect. With the deep analysis now available for Co-Investments investors can make informed decisions about their Co-Investment program and how to think about opportunities in the market.
“The increasingly heterogeneous investment environment creates opportunities to generate investment alpha, but makes it more challenging for LPs to identify strategies that fit their program targets. With analyses like this at their fingertips, LPs can understand the true drivers of market risk and returns and make efficient decisions about their investments.”
