Co-Investment for Family Offices: Access, Alignment and Due Diligence
Family offices co-invest to own specific companies alongside an experienced lead investor, at lower fees and with more say over what they buy than a blind-pool fund allows. It works when the family sees good deals, understands why it is being offered each one, and does its own diligence. It fails when the fee saving becomes the reason to say yes.
The appetite is clear on both sides. A 2025 BNY Wealth survey of 282 single-family office professionals found that 64% expect to make six or more direct investments in the coming year, and noted that limited in-house resources push many to co-invest alongside others. On the supply side, law firm Torys cited a 2024 Private Funds CFO survey in which 82% of private equity firms offered some form of co-investment, up from 75% in 2020.
This framework covers why family offices co-invest, where deals come from, which role to take, the terms that matter, and the diligence checklist we use. For the broader role of a family office, see What a Multi-Family Office Does for Tech Founders.
Key takeaways
- Co-investment gives family offices company-level exposure at lower fees, but the saving is worth nothing if deal selection is poor.
- Academic evidence points to adverse selection in co-investment offers, so the first diligence question is why you are seeing this deal.
- Choose your role on purpose, because leading, co-leading and following carry different rights, costs and workloads.
- No fee and no carry does not mean no cost, since transaction, monitoring and broken-deal costs still reach co-investors.
- A minority co-investor needs information rights, exit protections and follow-on rights in writing.
Why family offices co-invest
Four reasons come up in most conversations with families.
- Lower fee drag: co-investments often carry reduced or no management fees and carried interest
- Selection: the family chooses each company instead of committing to a blind pool
- Expertise: families with operating backgrounds can judge sectors they know better than a generalist fund
- Horizon: family capital can hold longer than a fund's life, which suits some companies and assets
The fee case is well documented. Sidley Austin lawyers, writing in the Law Gazette in October 2025, cited an industry survey in which around two-thirds of managers offer co-investments with no management fee and more than half charge no carried interest.
The risk case is documented too. In a 2015 study in the Journal of Financial Economics, Fang, Ivashina and Lerner found that co-investments by large institutional investors underperformed the funds they invested alongside, which the authors attributed to adverse selection in the deals offered. Solo deals that the investors sourced themselves did better.
The lesson for families is simple. The deals that reach you may be the ones the lead could not fill elsewhere. Your process has to find out which kind each deal is.
Where co-investment deals come from
Each channel brings a different kind of deal and a different risk.
| Source | What you get | Watch for |
|---|---|---|
| Funds you back as an LP | Deals from a manager you already know | Allocation order, tight timelines |
| Club deals with other families | Shared diligence, aligned horizons | No clear lead, slow decisions |
| Founders and accelerators | Early access, direct relationships | Small tickets, heavy support needs |
| Advisors and placement agents | A curated pipeline | Fees on both sides, deals shopped widely |
| Deal platforms | Volume and standard data | Quality filters, data room depth |
Early-stage deal flow benefits from structure. RaiseTalks gives investors a weekly shortlist of matched, pre-scored founders by stage, sector, ticket and region, each with an organized data room. We describe how accelerator graduates become syndicated rounds in From Cohort to Syndicate.
Lead, co-lead or follow
Your role sets your rights and your workload.
Lead: You set terms, run diligence and usually take the board seat. Highest control, highest work, and it needs a team that can do it.
Co-lead: You share diligence and negotiation with another investor, often with board observer rights. A good role for families with real sector expertise.
Follow: You accept the lead's terms and rely on its diligence, with information rights. Lowest work, highest dependence on the lead.
Most families should follow until they have done enough deals to know where they add value. They should lead only in sectors where they bring operating insight the market lacks.
Fees, carry and the costs that remain
No fee and no carry is a headline, not the full economics. Torys noted in 2025 that co-investors can still bear portfolio-company fees without the management-fee offset a fund's investors get. Transaction fees are often 1-3% of the purchase price, and monitoring fees can be charged as a share of earnings or a fixed amount. Warehousing costs and broken-deal expenses can also land on co-investors.
The terms to negotiate:
| Term | What to ask for | Why it matters |
|---|---|---|
| Management fee and carry | None or reduced, written per deal | The main source of savings |
| Portfolio-company fees | Full disclosure and fair sharing | A cost that "no fee" does not cover |
| Broken-deal expenses | A cap or clear allocation | Costs of deals that never close |
| Information rights | Same reporting as the lead fund | You cannot manage what you cannot see |
| Governance | Observer seat or consent on key matters | Protects against related-party deals |
| Transfer and exit | Tag-along and drag-along on equal terms | You exit when the lead exits |
| Follow-on rights | Pre-emption in future rounds | Protects your stake from dilution |
A co-investment is only as good as your answer to one question: why is this allocation available to me?
The co-investment due diligence checklist
Do not outsource diligence to the lead, even when you follow. Read its work, then test it.
- Why me, why now: Why is this allocation available, and who else was offered it?
- Lead conviction: How much of its own fund or balance sheet is the lead committing?
- Thesis and value creation plan: What has to go right, and who owns each lever?
- Financial quality: Do revenue, margins and cash reconcile across the model, accounts and bank statements?
- Legal and structure: Holding company, cap table, shareholder agreement and jurisdiction, confirmed with counsel.
- Entry terms: Are you entering at the same price and on the same terms as the lead?
- Downside case: What happens to your stake if the company raises its next round at a lower valuation?
- Exit path: Who buys this company, and when?
- Timeline: Is there enough time to diligence, or is the deadline doing the selling?
For frontier markets, add the checks in Red Flags That Sink Early-Stage Deals: unclear ownership, related-party revenue, missing IP assignment and regulatory exposure.
How to set up a co-investment program
A family that co-invests occasionally is reacting to deal flow. A family with a program decides in advance what it wants and who it wants to see it from. A program is built in four stages.
Stage 1: Policy. Write the annual co-investment budget, the maximum ticket per deal, target sectors and regions, and the follow-on reserve into the investment policy before the first deal.
Stage 2: Relationships. Pick a small number of lead investors whose sectors and stages match the policy, and let them know your criteria, ticket and decision speed. Leads offer allocations first to co-investors who answer quickly and reliably.
Stage 3: Process. Standardize the screening memo, the diligence checklist above and the approval steps, so a deal can move from first look to decision within the lead's timeline.
Stage 4: Review. Once a year, compare every co-investment with the thesis that justified it, and drop leads whose allocations keep disappointing.
Common co-investment mistakes
Saying yes because the fee is zero
What it looks like: A deal is approved mainly because it comes without fees or carry.
Why it hurts: Fee savings are small next to the loss on a weak company, and weak companies are what adverse selection delivers.
The fix: Score every deal on the same criteria as a fee-paying one, and record why it passed.
Building a portfolio by accident
What it looks like: A dozen positions accumulate deal by deal, half of them in one sector.
Why it hurts: The family carries a concentration nobody chose.
The fix: Set an annual co-investment budget, a maximum ticket per deal and a target sector mix in the investment policy.
Forgetting the follow-on reserve
What it looks like: The full allocation goes in at entry, with nothing kept back.
Why it hurts: When the company raises again, the family is diluted or forced to sell its rights.
The fix: Reserve capital for follow-on rounds in every early-stage co-investment.
Frequently Asked Questions
It is a direct minority investment in a company made alongside a lead investor, usually a private equity or venture fund, outside the fund itself. The family chooses the deal and typically pays lower fees than it would through the fund.
Many do not. A 2025 Law Gazette article by Sidley Austin lawyers cited a survey in which around two-thirds of managers charge no management fee on co-investments, though portfolio-company and broken-deal costs can still apply.
Not automatically. A 2015 study by Fang, Ivashina and Lerner found that institutional co-investments underperformed the funds they sat alongside, which the authors linked to adverse selection.
The main channels are fund managers they back as limited partners, club deals with other families, founders and accelerators, advisors, and deal platforms. Families with a clear thesis and fast decisions see the best deals.
At minimum, information rights equal to the lead's, tag-along and drag-along rights on equal terms, pre-emption rights in future rounds, and consent rights over related-party transactions. Have counsel review the documents in the relevant jurisdiction.
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What a Multi-Family Office Does for Tech Founders and Their Capital
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Partnership-Driven Real Estate: Co-Investing for Returns and Social Impact
From Cohort to Syndicate: Turning Graduates Into Investable DealsGETVISION works as a multi-family office for tech founders and investors: VC and private equity deal access, co-investment and capital structuring. Talk to our team.