Andrea Auerbach shares Cambridge Associates’ view on co-investing opportunities, encouraging investors to ask specific questions when deals are presented to them and ensure it is the right fit for their portfolio and their mission.
Not too long ago co-investing made up just 10% of the entire market, but “since co-investing has grown in popularity it creates a whole different dialogue,” she says.
“Adverse selection risk is always present, but when [co-investing] is a third of all market activity, it creates a much more interesting conversation,” she says. “[M]ost co-investing today is shown to your limited partner. An LP gives you your fund capital, so if you show them an opportunity that is not good, they’re just not going to be your partner anymore. As a general partner, showing your LP a bad deal is not only going to burn bridges, but they’re not going to commit to your fund and not going to say good things about you.”
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