Co-investment Capital Helps Clinch Bigger Deals

July 19, 2013 by Simon Meads

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IN THE HEADY precrisis days of cheap cash, top private equity firms without the capacity to absorb more capital turned away investors. Now some sovereign wealth and pension funds are competing with one another to invest alongside their preferred private equity managers, aggressively marketing themselves as potential co-investors and dangling the promise of fat checks to help their general partners clinch big deals. Such compacts have been integral to the industry for the past decade, but they’re getting bigger and more frequent as sophisticated investors such as Abu Dhabi Investment Authority (ADIA), the California Public Employees’ Retirement System (CalPERS) and China Investment Corp. (CIC) seek to minimize their fees and gain more control over how their money is spent. The sovereign wealth and pension fund community’s growing hunger for co-investment is creating a vast pool of shadow capital that threatens to shake up the leveraged buyout business. When it…

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