Why LPs should be cautious about co-investing

The history of investors trying to make co-investments with private equity firms or even go it alone is strewn with casualties.

Big asset owners in Asia may want do more co-investments and direct deals in private equity, but history is replete with cautionary tales of investors who tried to build up internal capabilities to do just that.

Over time, there have been cycles where limited partners LPs have tried to staff up and do deals directly and in general it’s been hard because they have structural disadvantages,” said one senior private equity professional, who did not want to critique investors in the asset class on the record.

Private equity firms focus on making deals, whereas small PE arms of pension funds are part of a bigger operation...

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