An equity co-investment is a small investment made in a business by investors who work with a venture capital (VC) firm or private equity fund manager. Other investors can take part in potentially very profitable ventures through equity co-investment without having to pay the typically hefty fees paid by a private equity fund.
Smaller or retail investors frequently do not have access to equity co-investment opportunities, which are typically only available to large institutional investors who already have a working relationship with the private equity fund manager.
When a private equity or venture capital fund makes a larger investment in a firm, it is known as a co-investment.
Co-investors often pay a lower or no fee for the investment and are given ownership rights proportionate to the amount they invested.
They provide advantages to the bigger funds in the form of more capital and lower risk, and they also benefit investors by allowing them to diversify their portfolios and build connections with senior private equity professionals.