Institutional investors are increasingly bypassing traditional private equity funds in favor of direct co-investments alongside PE firms. The value of co-investments more than doubled year-on-year to a record $198bn in the first half of 2026, according to S&P Global Market Intelligence. This shift offers lower fees, greater control, and higher potential returns.
The North Carolina Investment Authority plans to allocate about half of its future private equity deployment to co-investments, including a $200mn stake in Anthropic that could return five times its value. The $86bn Pennsylvania Public School Employees’ Retirement System estimates its co-investments outperform its overall PE portfolio by five to six percentage points due to fee savings. Unlike traditional funds, which charge 2% management fees and 20% carried interest, co-investments typically carry little to no fees.
The $89bn Alaska Permanent Fund Corporation uses co-investments opportunistically to increase sector exposure and control capital deployment pace. The trend is fueled by a prolonged dearth of realized returns and a slump in PE fundraising, with smaller firms offering co-investment opportunities to strengthen investor relationships.
Source: Financial Times Companies · Summarized by HeadlinesBriefing