Why Co-Investors Are Your Warmest Route to Fund LPs, in a $215 Billion Market

The market behind the path

The combined market for direct investments and co-investments reached $215 billion in 2025, made up of $161 billion in directs (about 75%) and $54 billion in co-investments (about 25%). A survey of 56 active buyers, the first to look at the two markets together, found that 78% expect combined volume to set a record in 2026. The buyers behind that capital are the same institutions and family offices a fund manager wants in its next fund, and they are often easier to reach through a live deal than through a cold pitch.

Public pensions are already part of the pattern. In 2025, 51 private equity managers raised capital for co-investment vehicles from public plans, as our analysis of US public pension commitments to private equity shows. Europe is moving in a similar direction, where co-investment funds have raised EUR 6.3 billion so far in 2026 against EUR 7.2 billion in all of 2025.

Why co-investors make warm introductions

A co-investor has already done work on you. It has read your deal memo, tested your numbers and watched how you behave when a deal gets hard. That is a stronger reference than a mutual acquaintance who has only met you at a conference. Our earlier look at the data behind warm introductions made the same point from the other direction: the closer the relationship, the faster the decision.

The terms are also becoming easier to discuss. Nearly 75% of co-investment buyers said they would pay variable carry tied to return thresholds, while more than 25% still insist on paying no carry. For directs, 46% would accept variable carry and 13% would pay above 20%. A manager who can offer a threshold-based carry structure removes a common objection before the conversation starts.

A step-by-step plan

Step one: List every past and prospective co-investor and mark which ones also commit to funds. A family office or pension that writes both kinds of check is your best first call. Use the co-investment definition with your team so everyone means the same thing when they offer it.

Step two: Offer one deal, not a program. A single clear opportunity with terms, a timeline and a named lead is easier to say yes to than a general invitation. Put the carry terms in the first message, including any threshold-based structure.

Step three: Ask for feedback before you ask for money. After the deal review, ask what the investor liked, what it worried about and what it would need to see to consider your fund. The answer is a map for your next raise.

Step four: Ask who else they would introduce you to. Co-investors usually sit in groups of peers. One sentence, such as "who in your network would want to see this kind of deal flow?", turns one relationship into several. Use our warm path guide to record each introduction and what it led to.

Step five: Keep the relationship warm between deals. A quarterly note with portfolio news and a realized exit keeps you in view. The guide to LP relationships between raises covers what to send and how often.

Step six: Track conversion. For each co-investor, record the date of the first deal, the date of the first fund conversation and whether a commitment followed. After four quarters you will see which profile of co-investor actually becomes an LP.

A short first message works best. Name the deal, state the terms in one line, say who on your team will lead, and ask for a twenty-minute call within two weeks. Leave the fund out of the first message and let the deal carry the conversation. If the investor asks about your next vehicle, answer briefly and offer to follow up after the transaction closes, so the order of events stays clear.

Where this works best and where it does not

This route suits established managers with deal flow and the ability to offer a slice of each transaction. It suits sponsor-led strategies and sector specialists where an investor can underwrite a single company. It is harder for blind-pool strategies with little deal-level visibility, and for first-time managers who cannot yet offer a co-invest allocation without crowding their own fund.

Large sovereign investors show how far the model can go. The Temasek stake in FSI combined an ownership interest with a commitment to future funds, which is the end point of a relationship that began with fund commitments. Few managers will get that far, but the direction holds: the deeper the relationship, the more options both sides have.

What to do this week

Pull your last three years of co-investors, flag the ones who also invest in funds, and pick the two warmest for a conversation before year end. Track where the conversations go, and compare them with the introductions you received through family offices and other LP types. FundLinx members can map which of their co-investors also back funds.

FundLinx Intelligence | FundLinx.ai