What Are Co-Investment Funds? A Guide for UHNW Investors

Private market investing can be frustrating for UHNW individuals. Access to compelling deals often requires large minimums, exposure comes bundled with high fees and long lock-ups and investors have little control over timing or asset selection. Traditional fund structures pool capital without offering visibility into specific assets or flexibility to choose involvement deal by deal.

Co-investment funds solve these issues. They allow direct participation in single transactions alongside experienced sponsors. Investors get to evaluate and opt into each opportunity, typically at a lower fee load and with improved transparency. For family offices with capital to deploy but no desire to build an in-house team, co-investment funds provide a streamlined, customisable way to access high-quality private investments.

Direct Exposure to Private Deals

Co-investment funds allow ultra-high-net-worth individuals (UHNWIs) to invest directly in private market deals, such as private equity, venture capital, private credit, or real estate, alongside a lead sponsor or main fund. Instead of investing through a traditional fund with broad mandates and layers of fees, co-investment funds provide a way to access individual deals on a discretionary basis, often with lower or no management fees and carried interest.

Common Legal Structures

Co-investment funds are typically set up using two Cayman Islands structures. These are widely recognised and offer flexibility, investor protection and tax neutrality. Neither requires investors to manage day-to-day operations and both are familiar to institutional counterparties.

Exempted Limited Partnerships (ELPs)

An Exempted Limited Partnership is a legal partnership between a General Partner (GP) and one or more Limited Partners (LPs):

• The GP manages the fund and makes investment decisions.
• LPs provide capital but have no management role and limited liability.

The key legal document is the Limited Partnership Agreement (LPA), which defines governance, economics, rights and responsibilities. ELPs are flexible: they can be used for a single deal or multiple investments over time and the LPA can be customised to include investor protections, committee participation, or special terms.

Segregated Portfolio Companies (SPCs)

A Segregated Portfolio Company is a single Cayman company that creates multiple internal portfolios, each legally separate from the others:

• Each portfolio can hold a different investment.
• Investors choose which portfolios to participate in.
• The liabilities of one portfolio are not shared with others.

This structure is efficient for offering multiple deals under one umbrella. Instead of forming a new entity for each opportunity, one SPC can issue multiple portfolios. It is ideal when different investors want to commit to different strategies without cross-contamination of risk.

Advantages for UHNW Investors

Deal-level discretion

Investors can choose which transactions to join rather than being locked into a blind pool. This flexibility means capital is only deployed into deals that align with an investor’s objectives, preferences, or risk appetite. It also empowers investors to avoid strategies they find too risky, unfamiliar, or misaligned with long-term goals, enabling more intentional capital deployment and better strategic fit.

Fee efficiency

Co-investments often come with significantly reduced or even waived management fees and carried interest compared to traditional private funds. This can enhance net returns and help investors retain more upside from successful deals. Over time, compounding fee savings can materially improve overall investment performance, particularly for family offices or institutions investing at scale.

Alignment with sponsors

Investors participate on similar or identical terms as the lead fund, creating better alignment of interests. There is generally no fee layering and sponsors often co-invest their own capital, reinforcing shared incentives. This structure builds trust between co-investors and sponsors, ensuring both parties benefit equally from upside and share downside risk.

Control and transparency

Co-investors gain direct visibility into deal specifics, including valuation, structure and projected returns. Many vehicles allow input on key governance items, such as investment or exit timing, especially if LPs serve on advisory committees. This level of transparency supports informed decision-making and gives investors the ability to better evaluate performance and influence outcomes.

Portfolio customisation

Rather than committing to a broad fund strategy, investors can build a bespoke portfolio by selecting individual opportunities across asset classes, geographies, or sectors. This approach supports diversification while preserving choice and timing control. Investors can manage exposure to specific industries or regions, and tailor the risk-return profile of their overall portfolio to meet evolving objectives.

Key Considerations

• Jurisdictional choice: Cayman Islands is favoured for tax neutrality and flexible legal frameworks
• Regulatory exemptions: Many co-investment vehicles can qualify as unregulated entities if they serve a small number of institutional investors
• Operational setup: Includes appointing a GP (often a Cayman exempted company), drafting an LPA and coordinating with administrators, custodians and AML officers
• Investor onboarding: Subscription processes must confirm accredited or qualified investor status and ensure compliance with KYC/AML rules

Conclusion

For UHNW investors, co-investment funds offer a practical way to access high-quality private market deals with greater flexibility, efficiency and control. By using tailored Cayman structures like ELPs or SPCs, investors can pursue direct exposure while managing risk and optimising for taxes.

If you’re exploring co-investment structures, FundFront can help design a bespoke solution tailored to your needs. Reach out to discuss how we can support your strategy.

Contact us via our contact form, or book an appointment here.

Articles that you may also be interested in:

• Comparing Cayman Islands Fund Structures
• Co-Investment Trends: FundFront in The Alternative Investor
• How to Launch a Fund-of-One: A Playbook for Family Offices
• Cayman SPC: When and Why to Use Segregated Portfolio Companies

Disclaimer

FundFront provides operational and technological solutions for fund structuring, securitisation and management. We do not provide legal, tax or financial advice. We recommend that you consult with professional legal or financial advisors to ensure compliance and appropriateness for your specific situation.