Direct Investments and Co-investments Expected to Surpass Primary Funds, Survey Shows
A survey by Houlihan Lokey's LP Compass indicates that direct investments and co-investments are expected to surpass traditional primary fund investing as the largest capital source within five years. The report highlights a growing shift in investor preferences toward more visibility over specific assets rather than committing blindly to funds. According to 78% of respondents, combined volumes could set a record in 2026 with $161 billion in directs and $54 billion in co-investments. In Europe, the appetite for co-investment opportunities is evident as fundraising has already reached €6.3 billion this year—close to last year's total of €7.2 billion—with a notable concentration into fewer funds. Pantheon Global Co-investment Opportunities Fund VI and Partners Capital Investment Group’s Merlin IV are among the largest recent closings, signaling strong demand for co-investments in specific sectors. Investors show varied willingness to pay variable carry on these investments, with more openness from co-investment buyers compared to direct investment buyers. This trend reflects a broader transformation in LP-GP dynamics and capital allocation strategies.
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Topics: co-investment direct investment LP-GP relations PE fundraising