OpenIM The Open Investment Model

SD-04.7 — Co-Investment Management

Business Domain: BD-04 Direct & Co-Investment (Front office) · Applies: PRIV

Purpose

Manages the institution’s co-investment activity across every BD-04 direct-investment mode — evaluating, underwriting and pacing the co-investments offered alongside its fund commitments. Co-investment is the hybrid investing mode: the institution invests directly in a single named asset, but a lead originator — a buyout GP, real-estate GP, infrastructure GP, TIMO / farmland operator / natural-resource fund, or direct-credit sponsor — has originated, priced and structured the deal and leads it. SD-04.7 serves co-investments across all five direct-investment modes BD-04 covers — buyout, real estate, infrastructure, natural resources, and direct credit. SD-04.7 owns the co-investment-specific capability; it depends on the BD-03 fund / manager / operator relationship for its deal flow, and it reuses the deal-chain diligence and approval capabilities (SD-04.3, SD-04.5) to underwrite each opportunity. A co-investing institution activates this Service Domain and the underwriting and approval steps, but leaves the origination chain (SD-04.1–04.2) dormant — the lead originator (GP, operator or sponsor, mode-dependent) originates.

Service Operations

  • Evaluate co-investment offers — receive and triage the co-investment opportunities GPs and operators syndicate, against the co-investment criteria. The originator may be a buyout GP, a real-estate GP, an infrastructure GP, a TIMO / farmland operator / natural-resource fund, or a direct-credit sponsor — the operation is mode-neutral.
  • Underwrite the co-investment — assess both the underlying asset and the lead originator’s underwriting, on the compressed syndication clock, reusing the SD-04.3 diligence and SD-04.5 approval capabilities across all five modes.
  • Negotiate the co-investment economics — the no-fee / no-carry or reduced-fee terms on the co-invested capital, with mode-specific conventions (the typical buyout no-fee/no-carry; the real-asset and infra split-economics arrangements; the loan-participation fee structure in direct-credit co-invests).
  • Pace and allocate the co-investment programme — capacity, concentration limits and pacing across the programme and its vehicles, with cross-mode coordination where the institution co-invests across modes.
  • Manage conflicts and adverse selection — assess whether the originator is syndicating its weaker deals (the adverse-selection question applies across modes — a TIMO’s offered timberland tract, an infra-fund’s co-invested project, a direct-credit sponsor’s syndicated loan position), and the conflicts the co-investment raises.
  • Maintain the originator relationship — the standing relationship through which co-investment deal flow arrives, from the BD-03 fund relationship out to mode-specific operator partnerships.

Inputs and outputs

  • Inputs: co-investment offers and diligence packs from the BD-03 fund / manager / operator relationship; the co-investment programme budget and the SD-01.10 pacing envelope.
  • Outputs: the co-investment underwriting decision, the executed co-investment and the programme allocation record — the executed co-investment is a direct holding handed post-close to the mode-appropriate Service Domain: SD-04.8 Portfolio-Company Stewardship & Value Creation for buyout, SD-04.10 Direct Real-Asset Management for real-estate / infrastructure / natural-resource co-invests, SD-04.11 Development & Construction Management where the co-invest involves a development asset, and SD-04.12 Loan Monitoring & Workout for direct-credit co-invests.

Entities

  • Consumes: Legal Entity (E-01, the originator — GP, TIMO, operator, direct-credit sponsor); PM-04 Portfolio Company (the buyout-mode underlying); RA-01 Direct Real Asset (the real-estate / infrastructure / natural-resource underlying); PM-14 Direct Loan (from SD-04.12 — the directly-originated private-credit position the co-investment underwrites alongside a sponsor); E-04 Holding / Position (book = ibor) for direct-credit co-invests; PM-09 Fund Investment — the fund relationship the co-investment sits alongside; the co-investment programme budget and the SD-01.10 pacing envelope.
  • Owns: none — the co-investment underwriting and programme records are analytical artefacts.

Standards

  • No external standard governs co-investment. The syndication process, the no-fee / no-carry economics and the adverse-selection question are practitioner conventions, with mode-specific variations across buyout, real-estate, infrastructure, natural-resource and direct-credit co-investments.
  • ILPA Principles 3.0 (2019) addresses co-investment allocation fairness, conflicts of interest and disclosure under its governance and alignment-of-interest principles. (ILPA does not publish a standalone “Co-Investment Guidance” document; the LP-side co-invest discipline is folded into Principles 3.0.)

Open extensions

  • The dependency edge to BD-03 — co-investment deal flow originates from the GP / operator relationship; this is recorded in both Business-Domain READMEs.
  • Whether the co-investment vehicle (a sidecar or co-investment fund) warrants explicit entity treatment.
  • The mode-specific underwriting sub-models (each of the five modes has different underwriting conventions and different conflict patterns).

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