Amid a challenging private market fundraising landscape, the flow of co-investment deals increased dramatically in 2023, according to a report by alternative investment management and advisory firm Hamilton Lane.
The report found the total value of co-investment deal flows reached US$8.87 billion in 2023, an increase from US$5.21 billion in 2022. The fourth quarter of 2023 saw the highest value of transactions for the year with a total deal value of US$2.64 billion.
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According to the report, general partners prefer to align with institutional investors with a capital certainty and execution credibility. “Reliance on co-investment capital created improved negotiating environment for co-investment partners around fees and governance,” it said.
As well, returns from several private assets outperformed public markets on a 10-year risk adjusted basis, as of Sept. 30, 2023. Private equity and credit assets outperformed comparable index funds — the S&P 500 index, the Russell 3000 index, MSCI world index and hedge funds, Credit Suisse high-yield index and Barclays aggregate bond index — by more than 300 basis points. In the real asset category, private real estate assets and private infrastructure outperformed real estate investment trusts and the Dow Jones Brookfield global infrastructure index by more than 300 basis points.