New York’s pension fund goes all-in on co-investments

Last fall, as pension funds, endowments, foundations and family offices looked to top off their allocation mandates for the year and general partners scrambled to secure capital commitments to close vehicles by the end of the year, the New York State Common Retirement Fund went all-in on co-investments.

New York’s state pension fund committed $2.7 billion to PE funds in November 2024, most of which were to co-investment vehicles—a signal that the promise of favorable fee structures and attractive deal terms still holds sway over the country’s largest institutional investors.

New York State Common Fund’s November actions offer a glimpse into the dominance of co-investment vehicles in the PE space. Last year, total capital raised for co-investments with PE managers globally reached $33.2 billion—the largest amount raised in over a decade, according to PitchBook data.

The largest was a $2 billion commitment (in four tranches of $500 million) to Neuberger Berman’s third co-investment fund, which invests alongside other PE managers primarily in North America and Europe. The $260 billion pension fund also committed €50 million (about $52.4 million) and $150 million to co-investment funds out of Bridgepoint Group and Francisco Partners, respectively.

Unlike traditional closed-ended funds, these vehicles typically provide low- and no-fee structures that allow traditional limited partners to co-underwrite direct deals. For institutional investors or high-net-worth individuals who make their investments alongside a buyout shop, these deals provide broader access to dealmakers as opposed to the level of access available to LPs in a closed-ended fund.

“If GPs weren’t using co-investments before, they’re realizing they have to now just to remain relevant,” said Andy Lund, global co-head of the private funds group at Houlihan Lokey. “We’re seeing small funds now offer co-investment, where it would have been an over-my-dead-body conversation three or four years ago.”

These products are also getting a lot bigger. The $33.2 billion in capital raised last year was across only 40 co-investment vehicles, the lowest fund count in over a decade. In fact, some of the largest deals that closed in 2024 included co-investors. For example, Canada Pension Plan Investment Board joined Blackstone in its purchase of AirTrunk at a $16 billion valuation last year; the Canadian pension fund participated in several of the largest global PE deals as a co-investor, including Apollo Global Management’s purchase of Pactiv Evergreen and GIC’s take-private of Allete.

More recently, co-investments have been used as a way to incentivize LPs to invest with a particular manager during a challenging fundraising period for PE firms, with GPs sweetening the deal with an added co-investment bonus. PE fundraising is set to come in slightly above the $300 billion for 2024 but below the $395 billion buyout funds raised in 2023, according to PitchBook’s 2024 Annual US PE Breakdown.

But, according to Lund, the market is getting quite crowded: “LPs are now bombarded with co-investments, and it’s gotten quite noisy. It’s almost like funds,” he said.

Featured image by Jenna O’Malley/PitchBook