Executive Summary

Co-investment opportunities allow wealth managers to provide high-net-worth clients with direct access to private company investments alongside institutional venture capital funds. This guide provides actionable frameworks based on insights from Inovia Capital, which manages over $2.5 billion in active AUA and another $1.3 billion in co-investments, Canaccord Genuity, and CI Assante Wealth Management, which run effective co-investment programs for wealth management clients.

Key Statistics:

• Canadian investors allocate only 3% to alternatives vs 40% for institutional investors

• US high-net-worth individuals (HNW) allocate 50% to alternatives; ultra-HNW allocate 76%

• Global VC funding reached $120.7 billion in Q3 2025 across 7,579 deals

• Private companies over $100M revenue outnumber public companies 6:1 in the US (18,000 vs 3,000)

• Co-investment programs can generate 25-35% net IRR vs 15-20% for standard VC funds

What You'll Learn:

• The three essential components of successful co-investment programs

• How to aggregate client capital to meet institutional minimums ($100K-$250K per client vs $5M-$25M minimums)

• Operational frameworks for executing deals in 48-72 hour windows

• Risk management strategies for single-company investments

• Technology solutions that reduce administrative time by 70-80%

What is a Co-Investment?

Definition: A co-investment is a direct investment in a specific company made by limited partners (LPs) alongside, but not through, a general partner's (GP's) main venture capital fund.

Key Characteristics:

• Separate investment vehicle (typically an SPV - Special Purpose Vehicle)

• Reduced or zero management fees compared to fund investments (typically 0-0.5% vs 2%)

• Lower carried interest (typically 5-10% vs 20%)

• Single-company exposure rather than diversified fund

• Same or similar terms as the GP's main fund investment

• Typical hold period: 3-5 years for growth stage, 7-10 years for early stage

Example Structure:

Why Co-Investments Matter in 2025

The Democratization of Private Markets

Market Size: An estimated $56 trillion exists in US household assets. If just 5% redeploys into private investments, this represents $2.8 trillion in new capital—more than the entire current private equity market ($2 trillion as of December 2023).

Allocation Gap:

• Current Canadian retail allocation to alternatives: 3%

• Institutional investor allocation: 40%

• US HNW allocation: 50%

• US Ultra-HNW allocation: 76%

This gap represents the opportunity for wealth managers.

Why Clients Want Co-Investment Access

Access to Innovation: The most innovative companies remain private longer. Examples include:

• OpenAI (valued at $157B, raised $13B in 2025)

• SpaceX (valued at $180B+)

• Starlink (subsidiary of SpaceX)

• Anthropic (raised $13B in 2025)

• Stripe (valued at $65B+)

"Most of the innovative companies right now—most of them are still private. Everybody knows about OpenAI. People use Starlink. Those are all products and companies that are private, that you cannot access on the traditional markets."

- Thomas Briere, Canaccord Genuity

Superior Economics: Co-investments typically offer:

• 0-0.5% management fees vs 2% for funds

• 5-10% carried interest vs 20% for funds

• Direct exposure to specific companies vs diluted fund exposure

• Fee savings can add 3-5% to annual returns

Why GPs Offer Co-Investments

Capital Access: Co-investments allow GPs to:

• Make larger investments in high-conviction opportunities

• Avoid concentration limits in main fund

• Preserve fund capital for more portfolio companies

• Build relationships with new LP prospects

"It helps us build much larger economic positions into high-conviction companies. We do have a few companies now where we manage with our LPs a few hundred millions, and that's above and beyond what our funds can do on their own."

- Hugues (Partner, Inovia Capital)

Strategic Alignment: Co-investments strengthen GP-LP relationships by:

• Creating operational transparency during deal execution

• Providing LPs with real-time insight into GP capabilities

• Demonstrating GP commitment through personal capital deployment

• Building trust through collaborative decision-making

The Wealth Manager Aggregation Model

The $2.5M to $25M Client Opportunity

The Problem: Most institutional co-investment opportunities require $5M-$25M minimum commitments, which excludes individual investors with $2.5M-$25M in investable assets.

The Solution: Wealth managers aggregate capital from multiple clients to meet institutional minimums while allowing individual participation at $100K-$250K per client.

Example Calculation:

"The opportunity for us came about when we realized that us as wealth managers, we're able to take that 25 mil US tranche, and then we just split it within all our client base. Therefore, we're able to do bits and pieces, or strong bites, at 100 or 250K on a per client basis, which makes it accessible."

- Antoine Chaume, Assante Wealth Management

Benefits of the Aggregation Model

For Clients:

• Access to institutional-quality deals previously unavailable

• Proper portfolio diversification across multiple co-investments

• Professional due diligence and ongoing monitoring

• Consolidated reporting and tax documentation

• Lower individual capital requirements

For Wealth Managers:

• Differentiated value proposition for client acquisition

• Increased wallet share from existing clients

• Higher client retention and satisfaction

• New revenue streams from alternative investments

• Competitive advantage over traditional advisors

For GPs:

• Single point of contact vs managing 50+ individual investors

• Streamlined subscription and capital call processes

• Reliable capital deployment from committed partners

• Access to growing private wealth channel

• Reduced administrative burden

"These opportunities are oftentimes door openers with high net worth individuals, where you're bringing them an exclusive opportunity to invest in a late-stage private tech company."

- Thomas Briere

What Makes a Great Co-Investment Opportunity

Company Quality Criteria

Growth Stage Companies (70-80% of programs):

• Proven business model with product-market fit

• Predictable revenue growth (30%+ YoY)

• Clear path to profitability or already profitable

• Professional management team

• 3-5 year expected hold period

• Target returns: 3-5x invested capital

Early Stage Moonshots (20-30% of programs):

• Repeat founders with prior successful exits

• Large addressable market ($1B+)

• Unique technology or business model

• Strong early traction metrics

• 7-10 year expected hold period

• Target returns: 10x+ invested capital

"We want de-risked companies in relatively mature markets that have typically a 3 to 5X return potential over a similar 3 to 5 year holding period. 90% of our co-investments have been in that former bucket of mature growth assets that have predictable revenue growth."

- Hugues Lalancette

Investment Terms to Evaluate

Essential Terms Checklist:

✓ Fee Structure:

• Management fee: 0-0.5% (vs 2% for funds)

• Carried interest: 5-10% (vs 20% for funds)

• No additional layers of fees

✓ Share Class:

• Same class as GP's fund or better

• Pari passu economic rights

• Pro-rata participation rights in future rounds

• Standard liquidation preferences (1x non-participating preferred)

✓ Governance:

• Information rights equivalent to major shareholders

• Access to board materials (when appropriate)

• Ability to attend annual shareholder meetings

• Clear communication protocols with GP

✓ Liquidity Considerations:

• Expected hold period aligned with client needs

• GP strategy for providing liquidity (secondary sales, tender offers)

• Transfer restrictions and rights of first refusal

• Tag-along and drag-along rights

Red Flags to Avoid:

• 🚩Multiple layers of SPVs (SPV of SPV of SPV)

• 🚩Fees exceeding 1% management + 15% carry combined

• 🚩Inferior share class vs GP's fund

• 🚩No clear liquidity strategy

• 🚩Minimal GP co-investment alongside LPs

GP Relationship Quality

Essential GP Characteristics:

Track Record:

• Minimum 3-5 years operating history

• Multiple successful exits demonstrating repeatable process

• Strong vintage year performance across market cycles

• Top quartile returns in peer comparison

Transparency:

• Detailed investment memos with financial models

• Complete due diligence findings shared

• Regular portfolio company updates (quarterly minimum)

• Open communication about challenges and risks

• Willingness to discuss mistakes and lessons learned

Operational Excellence:

• Defined co-investment process and allocation policies

• Technology-enabled subscription and reporting

• Experienced portfolio support team

• Clear escalation paths for issues

• Responsive communication (24-48 hour response time)

Partnership Mindset:

• Views LPs as long-term partners vs transactional capital

• Considers LP liquidity needs in exit decisions

• Fair allocation across all co-investing LPs

• Proactive sharing of follow-on opportunities

• Access to portfolio company management teams

"One of the things that we came to realize is that when there are really shiny and interesting opportunities, clients tend to be less fee-sensitive. So one thing which we're more and more looking out for is alignment—that essentially, our clients eat first, and then everyone else eats afterwards."

- Antoine Chaume

Building Your Co-Investment Process: Step-by-Step

Phase 1: Strategy Development (Weeks 1-4)

Step 1: Define Investment Criteria

Create written investment policy covering:

Sector Focus:

• Target: 2-4 primary sectors (e.g., enterprise SaaS, healthcare tech, fintech)

• Rationale: Deep expertise in fewer sectors vs superficial knowledge across many

Stage Preference:

• Early stage (Seed to Series A): Higher risk, 10x+ returns, 7-10 year holds

• Growth stage (Series B to Pre-IPO): Lower risk, 3-5x returns, 3-5 year holds

• Define percentage allocation to each stage

Geography:

• Primary markets: North America, Europe, specific focus areas

• Emerging markets: Case-by-case evaluation

Return Requirements:

• Minimum target net IRR: 20-25% for growth, 30%+ for early

• Loss tolerance: Maximum 20% of deals can return <0.5x

Position Sizing:

• Minimum investment: $500K-$1M (for operational efficiency)

• Maximum investment: 5-10% of total co-investment program AUM

• Maximum per client: 5-10% of their alternative allocation

Step 2: Establish Operational Infrastructure

Required Components:

Technology Platform:

• Subscription document automation

• Capital call and distribution processing

• Portfolio reporting and analytics

• Tax document generation (K-1s, T5013s)

• Integration with custodian systems

Recommended Solutions: Vessel, iCapital, Opto, Moonfare (Note: Evaluate based on your specific needs)

Legal Framework:

• Master subscription document templates

• Operating agreements for pooled vehicles

• Disclosure documents for client communications

• Compliance policies for suitability and allocation

Personnel:

• Dedicated alternatives specialist (minimum 1 FTE for every $50M in co-investment AUM)

• Legal/compliance review capacity

• Client service support for investor questions

• Relationship manager for GP communications

Step 3: Build GP Relationships

Target 5-10 Core GP Partnerships:

Relationship Development Activities:

• Attend annual LP meetings and portfolio company events

• Provide thoughtful feedback on investment opportunities

• Introduce potential LPs from your network

• Share market intelligence and deal flow

• Invest in their main funds before seeking co-investments

Evaluation Process:

• Request track record data (GIPS-compliant when available)

• Conduct reference calls with 3-5 existing LPs

• Review fund documentation and fee structures

• Meet entire investment team, not just fundraising professionals

• Visit office and observe team dynamics

"It's really about setting expectation, trust, and communication. Some of the bigger LPs work shoulder to shoulder with us. The smaller ones tend to rely on our due diligence work."

- Hugues Lalancette

Phase 2: Deal Execution (48-72 Hour Timeline)

Sample Typical Co-Investment Timeline:

Day 0 (AM): GP sends investment memo and invites co-investment participation

Day 0 (PM): Wealth manager reviews opportunity

• Assess fit with investment criteria (30 minutes)

• Initial financial model review (1 hour)

• Identify participating clients based on pre-authorized criteria (1 hour)

Day 1: Due diligence and client communication

• Deep dive on investment memo (2-3 hours)

• Management team Q&A call (1 hour)

• Client communications sent to pre-qualified participants (template-based)

• Collect preliminary interest and capacity

Day 2 (AM): Finalize commitment

• Aggregate client commitments

• Submit total allocation request to GP

• Confirm final terms and documentation requirements

Day 2 (PM): Documentation

• Execute subscription documents via electronic platform

• Collect initial capital calls or prepare wire instructions

• Confirm closing timeline

Day 3-5: Closing

• Final legal documentation review

• Capital wires completed

• Investment confirmed and recorded

Keys to Fast Execution:

Pre-Authorization Framework:

• Clients pre-approve participation in deals meeting defined criteria

• Standing authorization up to specified dollar amounts

• Automatic opt-in vs opt-out mechanism reduces decision time

Template-Driven Communications:

• Standard investment summary format

• Risk disclosure templates

• Subscription document standardization

Technology Automation:

• Electronic signature collection

• Automated capital call processing

• Real-time status tracking

"We've had a few instances where a company's doing a tender and funds or docs need to be in in 5 days. Having a partner like Vessel would help streamline that process."

- Thomas Briere

Phase 3: Ongoing Management

Portfolio Company Monitoring:

Information Receipt:

• Quarterly financial statements and board decks

• Monthly operational metrics dashboards

• Material event notifications (funding rounds, M&A discussions, management changes)

• Annual audited financials

GP Communication:

• Quarterly LP update calls

• Semi-annual in-person meetings

• Annual portfolio company day events

• Ad-hoc updates for material developments

Client Reporting:

Quarterly Reports Should Include:

• Portfolio company operational updates

• Valuation changes (based on latest funding rounds or GP marks)

• Capital activity (calls and distributions)

• Market developments affecting holdings

• Outlook and expected liquidity timeline

Annual Reporting:

• Comprehensive performance attribution

• Benchmark comparison (Cambridge Associates, PitchBook benchmarks)

• Tax documentation (K-1s, T5013s)

• Portfolio diversification analysis

Technology Platform Features:

• Consolidated view across all co-investments

• Performance tracking vs benchmarks

• Document library for all investment materials

• Mobile access for clients

"Having access to a single platform which brings back the information up to date, essentially, is something which is really that we're looking forward to."

- Quote from Antoine Chaume

Phase 4: Liquidity Management

Exit Pathways:

IPO (Initial Public Offering):

• Most profitable exit for successful companies

• Typical lockup period: 6 months post-IPO

• May require 1-2 years of public trading before full liquidity

• Best for companies >$500M revenue with strong growth

M&A (Acquisition):

• Faster liquidity than IPO (typically 3-6 months from LOI to close)

• May involve earn-outs or equity rollovers

• Common in enterprise software, fintech, healthcare

Secondary Sales:

• Selling shares to other investors before company exit

• Typical pricing: 70-90% of last funding round valuation

• Growing secondary market enables earlier liquidity

• Useful for LPs with changed circumstances

Tender Offers:

• Company or investor buys back shares at specified price

• Allows partial liquidity while maintaining investment

• Becoming more common for mature private companies

GP-Facilitated Liquidity:

• Some GPs run continuation funds purchasing assets from existing funds

• Allows LPs to exit while GP maintains position

• Typically offered at fair market value based on independent valuation

Timeline Expectations by Stage:

• Seed/Series A investments: 7-10 years to liquidity

• Series B/C investments: 5-7 years to liquidity

• Growth/Pre-IPO investments: 2-4 years to liquidity

"Having a GP that has an exit strategy that's not just looking to bring you some deals, but is also thinking, 'What do we do with SpaceX if the valuation keeps going up, or are we able to provide liquidity in the secondary market?' I think that for retail clients is especially important given their time horizon is very different than for institutions."

- Thomas Briere

Risk Management and Portfolio Construction

Understanding Co-Investment Risk Profile

Key Risks:

Concentration Risk:

• Single-company exposure vs diversified fund

• Company-specific operational, market, and execution risks

• No natural diversification within the investment

Illiquidity Risk:

• 3-10 year hold periods common

• Limited secondary market options

• Cannot access capital for emergencies or opportunities

Valuation Risk:

• Private company valuations can be subjective

• Mark-to-market fluctuations based on funding rounds

• Down rounds can significantly impact valuations

GP Dependency Risk:

• Success depends on GP's ongoing engagement

• GP conflicts of interest (fund vs co-invest priorities)

• GP team turnover affects portfolio support

Information Asymmetry:

• Less information than public companies

• Delayed reporting (quarterly vs real-time)

• Limited ability to independently verify information

Portfolio Construction Framework

Recommended Allocation Structure:

Total Portfolio Perspective:

Co-Investment Portfolio Diversification:

Position Sizing Formula:

Diversification Strategies

GP Diversification:

• Work with 5-10 GPs to avoid single manager dependency

• Mix established firms (>$1B AUM) with emerging managers ($100M-$500M AUM)

• Combine generalist and specialist GPs

Sector Diversification:

• Target 3-5 core sectors where you have conviction

• Avoid >40% concentration in any single sector

• Balance defensive sectors (healthcare, enterprise software) with growth sectors (consumer, fintech)

Stage Diversification:

• Growth stage (Series B+): 60-70% of portfolio (lower risk, shorter duration)

• Early stage (Seed-Series A): 20-30% of portfolio (higher risk/return, longer duration)

• Pre-IPO/Late stage: 10-20% of portfolio (lowest risk, nearest liquidity)

Vintage Year Diversification:

• Invest across multiple years to smooth market cycle effects

• 2-4 new co-investments per year maintains diversification

• Avoid concentrating investments in single vintage (2021 vintage example)

Geographic Diversification:

• Primary: North America (60-70%)

• Secondary: Europe (20-30%)

• Opportunistic: Asia, Emerging Markets (10-20%)

Client Suitability Assessment

Minimum Client Qualifications:

Financial Requirements:

• Accredited investor status (Canada: $1M financial assets or $5M net worth)

• Minimum investable assets: $2M-$3M

• Alternative allocation capacity: $400K-$900K minimum

• Liquidity buffer: Maintain 12-24 months expenses in liquid assets

Risk Tolerance:

• High risk tolerance assessment score

• Understanding of total loss potential

• Comfort with 5-10 year illiquidity

• Experience with alternative investments preferred

Knowledge Requirements:

• Understand private company investing

• Recognize lack of liquidity and valuation transparency

• Accept concentration risk of single-company bets

• Realistic return expectations (not every investment succeeds)

Suitability Questionnaire Sample Questions:

1. What percentage of your portfolio can remain illiquid for 5-10 years?

2. How would you react if a co-investment declined 50% in value before recovering?

3. Have you previously invested in private companies, venture funds, or similar illiquid assets?

4. Do you need to access this capital for any planned expenses in the next 7 years?

5. Do you understand that co-investments may result in total loss of invested capital?

Technology Solutions for Scaling Co-Investment Programs

Platform Requirements

Essential Platform Features:

Subscription Management:

• Electronic signature collection

• Automated document generation

• Compliance and suitability tracking

• KYC/AML verification

• Investor accreditation verification

Capital Administration:

• Automated capital call notices

• Wire instruction management

• Distribution processing

• Bank account reconciliation

• Multi-currency support

Portfolio Reporting:

• Consolidated portfolio view across all co-investments

• Performance tracking (IRR, MOIC, DPI calculations)

• Benchmark comparison capabilities

• Scenario analysis and stress testing

• Mobile-responsive client portal

Document Management:

• Centralized repository for all investment documents

• Version control and audit trails

• Secure client access to their specific holdings

• Integration with DocuSign, HelloSign for e-signatures

Tax Reporting:

• K-1 and T5013 generation

• Cost basis tracking

• Gain/loss reporting

• Integration with tax preparation software

Communication Tools:

• Templated investor communications

• GP update distribution

• Automated status notifications

• Q&A management system

Technology Stack Comparison

Leading Solutions:

Vessel

• Focus: End-to-end co-investment workflow automation

• Best For: Wealth managers and GPs streamlining processes

• Key Features: Fast deal execution, consolidated reporting, regulatory compliance

• Integration: Works with most custodians and accounting systems

iCapital Network

• Focus: Alternative investments marketplace and technology

• Best For: Large wealth management firms and RIAs

• Key Features: 6,000+ alternative products, turnkey operations

• Minimum: Typically $100K-$250K per client

Opto Investments

• Focus: Private markets operating system

• Best For: Family offices and wealth managers

• Key Features: Portfolio monitoring, capital management, performance analytics

• Integration: Works with Addepar, Black Diamond, Orion

Moonfare

• Focus: Private equity fund access platform

• Best For: Individual investors and advisors seeking fund access

• Key Features: Pre-vetted fund opportunities, co-investment access

• Minimum: €50K-€100K typical minimums

AngelList (for venture/startup focus)

• Focus: Venture capital and startup investing

• Best For: Early-stage venture co-investments

• Key Features: Rolling funds, syndicates, founder-friendly terms

• Community: Large network of angels and emerging managers

ROI Expectations:

• 70-80% reduction in administrative time per deal

• 3-5x increase in number of deals manageable by same team

• 50% faster deal execution (72 hours vs 5+ days)

• 90%+ reduction in documentation errors

• Break-even typically achieved at $25M-$50M in co-investment AUM

"In the past, you know, we would have one or two employees full-time for one or two weeks, just filling out the paperwork and making sure everything checks out. Now with technology and your platform, it makes it really easier. If it makes my life easier, it makes your life easier, and the GP's life easier."

- Antoine Chaume

Regulatory Considerations and Compliance

Canadian Regulatory Framework

Applicable Regulators:

• CIRO (Canadian Investment Regulatory Organization) - successor to IIROC

• Provincial securities commissions (e.g., AMF in Quebec, OSC in Ontario)

• FINTRAC for AML/KYC requirements

Key Regulatory Requirements:

Prospectus Exemptions:

• Most co-investments use accredited investor exemption

• Accredited investor definition (Canada):

Know Your Client (KYC) Obligations:

• Document investor sophistication and understanding

• Assess financial capacity for illiquid investments

• Evaluate risk tolerance alignment

• Ongoing suitability monitoring

Know Your Product (KYP) Requirements:

• Understand co-investment structure and terms

• Document due diligence process

• Maintain investment rationale documentation

• Stay current on portfolio company developments

Disclosure Obligations:

• Clear explanation of risks (concentration, illiquidity, valuation)

• Fee disclosure (all layers of fees must be transparent)

• Conflict of interest disclosure

• Performance reporting (cannot cherry-pick successful deals)

Ongoing Compliance

Annual Compliance Checklist:

✓ Review and update co-investment program documentation

✓ Assess continued suitability for all participating clients

✓ Document allocation decisions for oversubscribed deals

✓ Review fee disclosure accuracy

✓ Update risk disclosures for material changes

✓ Maintain current GP due diligence files

✓ Conduct compliance training for staff

✓ Engage external compliance consultant for program audit

Common Challenges and Solutions

Challenge 1: Speed of Execution

Problem: GPs often provide 48-72 hour decision windows, making it difficult to conduct due diligence, communicate with clients, and collect commitments.

Solutions:

Pre-Authorization Framework:

• Establish standing authorization from qualified clients

• Define auto-approve criteria (e.g., GP, stage, sector, size)

• Clients opt-in to program with pre-defined allocation amounts

• Reduces decision time from days to hours

Template-Driven Process:

• Standardized investment summary format

• Pre-approved risk disclosures

• Master subscription agreements with minimal deal-specific modifications

• Automated document generation

Technology Enablement:

• Electronic signature platforms (DocuSign, Vessel)

• Automated notification systems

• Mobile-responsive review and approval

• Real-time tracking dashboards

Results: Firms implementing these solutions report 60-70% faster execution times.

Challenge 2: Due Diligence Resource Constraints

Problem: Wealth management teams lack resources for institutional-grade due diligence on every opportunity.

Solutions:

Tiered Due Diligence Approach:

Tier 1 (Trusted GP + Standard Deal):

• Rely primarily on GP's due diligence work

• Focus review on fit with investment criteria

• Standard risk assessment checklist

• 2-4 hours total time investment

Tier 2 (New GP or Large Position):

• Review GP's investment memo in detail

• Participate in management Q&A session

• Conduct reference calls with 1-2 customers

• Verify key assumptions in financial model

• 8-12 hours total time investment

Tier 3 (Unusual Structure or Highest Risk):

• Full independent due diligence

• Engage third-party industry experts

• Detailed competitive analysis

• Multiple management team interactions

• Legal review of all transaction documents

• 20-40+ hours total time investment

Relationship Leverage:

• Build deep relationships with 5-10 trusted GPs

• GP shares complete due diligence work product

• Ability to ask questions and receive detailed responses

• Trust built over multiple successful transactions

Collaborative Approach:

• Partner with other wealth managers on large opportunities

• Share due diligence work and costs

• Leverage each firm's sector expertise

• Join forces for better GP terms and access

Challenge 3: Client Communication and Education

Problem: Co-investments are complex products requiring significant client education, especially for first-time alternative investors.

Solutions:

Structured Education Program:

Level 1: General Alternative Investment Education

• Quarterly webinars on private market trends

• Written guides explaining asset class characteristics

• Case studies of successful and unsuccessful investments

• Comparison to public market investing

Level 2: Co-Investment Specific Training

• Detailed explanation of co-investment structure

• Risk and return profile discussion

• Liquidity timeline expectations

• Tax implications and reporting

• Q&A sessions addressing common concerns

Level 3: Deal-Specific Communications

• Concise investment summary (2-3 pages)

• Video update from GP (when available)

• Risk factors specific to opportunity

• Expected timeline and process

• Clear next steps and decision deadline

Communication Best Practices:

• Use plain language, avoid jargon

• Focus on "why this matters to you"

• Provide context (market trends, comparable deals)

• Be transparent about risks and limitations

• Set realistic expectations on returns and timing

• Document all communications for compliance

Template Library:

• Program introduction deck

• Investment policy statement template

• Deal announcement email template

• Quarterly portfolio update template

• Annual tax reporting summary template

Challenge 4: Portfolio Reporting and Valuation

Problem: Private company valuations are subjective, reported on delayed schedules, and difficult to aggregate across multiple investments.

Solutions:

Valuation Methodology:

Fair Value Hierarchy:

1. Recent funding round (last 6 months): Use latest round price

2. Recent comparable M&A: Apply relevant multiples to company metrics

3. GP mark: Accept GP's quarterly valuation if supported by methodology

4. Stale valuation (>1 year): Apply discount for increased uncertainty

Disclosure: Clearly communicate valuation limitations to clients

• "Valuations reflect most recent funding round and may not represent actual sale price"

• "Private company valuations are estimates and may differ significantly from ultimate realization"

Reporting Frequency and Content:

Quarterly Reporting:

• Portfolio summary with current valuations

• New investments and exits during quarter

• Capital activity (calls and distributions)

• Material portfolio company developments

• Market commentary and outlook

Annual Reporting:

• Comprehensive performance review (IRR, MOIC, DPI)

• Benchmark comparison (Cambridge Associates VC Index)

• Top 5 best and worst performers

• Portfolio company deep dives (3-5 companies)

• Tax documentation (K-1s, T5013s)

Technology Solutions:

• Platforms that aggregate data from multiple GPs

• Automated valuation updates from GP reporting

• Benchmark integration for context

• Mobile-accessible dashboards for clients

Challenge 5: Managing Client Expectations During Down Markets

Problem: Private market valuations can decline significantly during market downturns, causing client anxiety and redemption pressure.

Solutions:

Proactive Communication Strategy:

Before Market Downturns:

• Set expectations that volatility is normal

• Share historical drawdown examples

• Explain valuation lag effect in private markets

• Emphasize long-term investment horizon

• Document client understanding and acceptance

During Market Downturns:

• Increase communication frequency (monthly vs quarterly)

• Provide context on market conditions

• Highlight portfolio companies executing well despite environment

• Remind clients of illiquid nature (can't panic sell)

• Share GP perspective and plans

After Valuations Decline:

• Transparent explanation of valuation changes

• Breakdown by portfolio company

• Compare to public market comparables

• Emphasize unrealized nature of marks

• Focus on operational progress vs valuation

Perspective Framing:

• Show historical recovery patterns

• Highlight that best vintages often invest during downturns

• Note forced hold period prevents locking in losses

• Remind of diversification across portfolio

"Most of our clients are tech entrepreneurs, tech and real estate entrepreneurs. What we're trying to achieve for them is diversification. For us to take a step back and work with amazing managers—great track record—helps us really diversify the portfolio."

- Antoine Chaume

Performance Measurement and Benchmarking

Key Performance Metrics

Internal Rate of Return (IRR):

• Time-weighted return accounting for timing of cash flows

• Industry standard for private market performance

• Target ranges:

Calculation Example:

Multiple on Invested Capital (MOIC):

• Total value divided by total invested capital

• Easy to understand, ignores timing

• Target ranges:

Calculation Example:

Distributions to Paid-In Capital (DPI):

• Cash returned divided by total invested capital

• Measures actual liquidity, not paper gains

• Target: >1.0x DPI within 5-7 years

Residual Value to Paid-In Capital (RVPI):

• Current value of remaining holdings divided by invested capital

• Measures unrealized value

• Total Value to Paid-In (TVPI) = DPI + RVPI

Benchmark Comparison

Relevant Benchmarks:

Cambridge Associates US Venture Capital Index:

• Most widely used VC benchmark

• Pooled returns from 1,500+ venture funds

• Updated quarterly

• Segmented by vintage year and fund size

PitchBook Benchmarks:

• Granular benchmarks by sector, stage, geography

• Updated quarterly

• Includes co-investment specific data

Preqin Private Capital Index:

• Global private markets benchmarks

• Includes distributions and valuations data

• Customizable peer groups

Comparison Framework:

Attribution Analysis

Understanding Performance Drivers:

Fee Impact:

• Co-investment fees: 0.5% management + 10% carry

• Standard fund fees: 2% management + 20% carry

• Fee savings: ~3-4% annually to returns

Selection Effect:

• Co-investments in GP's highest-conviction deals

• Ability to pass on less attractive opportunities

• Enhanced returns from selective participation

Concentration Effect:

• Single-company exposure amplifies both gains and losses

• Winners have outsized impact (vs diversified fund)

• Higher volatility but potentially higher returns

Timing Effect:

• Co-investment deployment during favorable market conditions

• Avoidance during overheated periods

• Market timing skill of GP and LP

Example Attribution:

Reporting Best Practices

Client-Facing Performance Reports Should Include:

Summary Page:

• Total co-investment portfolio value

• Year-to-date and since-inception returns (IRR, MOIC, DPI)

• Benchmark comparison with context

• Number of holdings and diversification metrics

Portfolio Holdings:

• Company name, sector, stage

• Investment date and amount invested

• Current valuation and unrealized gain/loss

• Recent developments and outlook

Activity Summary:

• New investments completed

• Distributions received

• Capital calls funded

• Exits and realizations

Forward Look:

• Expected near-term liquidity events

• Anticipated capital calls

• Upcoming portfolio company milestones

Appendices:

• Detailed methodology notes

• Benchmark definitions

• Risk disclosures

• Glossary of terms

Frequency:

• Simplified updates: Quarterly

• Comprehensive reports: Annually

• Material event notifications: As they occur

The Future of Co-Investment Access (2025 and beyond)

Market Size Projections

Current State (2025):

• Private equity assets: $2 trillion (Cambridge Associates)

• Private credit assets: $2 trillion (Preqin)

• US household assets: $56 trillion

• Current household allocation to private markets: 2-3%

Projected Growth (2025-2030):

• Private markets AUM: $6-8 trillion (+200-300%)

• Household allocation target: 5-10% of portfolios

• New capital from households: $2.8-5.6 trillion

• Annual growth rate: 15-20% for next 5 years

Drivers:

• Regulatory changes enabling broader access

• Technology platforms reducing friction

• Generational wealth transfer ($30 trillion to millennials by 2030)

• Continued privatization trend (fewer public companies)

Technology Disruption

Emerging Technologies:

AI-Powered Deal Sourcing:

• Machine learning identifies investment opportunities before public announcements

• Natural language processing analyzes news, filings, and market signals

• Predictive models score deal quality and fit

• GPs and LPs gain competitive advantage through earlier access

Blockchain and Tokenization:

• Security tokens represent fractional co-investment interests

• Smart contracts automate capital calls and distributions

• Secondary trading on digital exchanges increases liquidity

• Lower minimums enable broader participation ($10K-$25K vs $100K+)

Automated Due Diligence:

• AI agents conduct preliminary company analysis

• Automated financial model validation

• Sentiment analysis of customer reviews and employee feedback

• Competitive landscape mapping

• Reduces due diligence time by 60-70%

Enhanced Portfolio Analytics:

• Real-time performance dashboards (not quarterly delays)

• Predictive exit modeling based on market conditions

• Scenario analysis and stress testing

• Personalized insights based on client portfolios

Democratization Continues

Expanding Accessibility:

Lower Minimums:

• Current: $100K-$250K typical

• 2026-2027: $50K-$100K becoming standard

• 2028-2030: $10K-$25K possible with tokenization

• Enables mass affluent participation (not just HNW)

Simplified Structures:

• Evergreen funds replacing traditional closed-end structures

• Quarterly liquidity windows (vs locked up for full term)

• Auto-diversified portfolios of co-investments

• "Index fund" approach to co-investing

Embedded Finance:

• Co-investment access built into digital wealth platforms (Wealthsimple, Betterment)

• Robo-advisors offering private market exposure

• 401(k) and retirement plan integration

• Direct-to-consumer GP offerings

"The space is being democratized every month. You're even looking now at Wealthsimple, which is a very good platform that's used more by some of the younger crowd. Some of these investments are now even being offered on those types of platforms."

- Thomas Briere

Key Takeaways

Essential Success Factors

For Wealth Managers Building Co-Investment Programs:

1. Start with Strategy: Define clear investment criteria before evaluating opportunities

2. Build Infrastructure First: Implement technology and processes before accepting deals

3. Focus on Relationships: Deep partnerships with 5-10 GPs beats surface relationships with 50

4. Educate Clients Thoroughly: Set realistic expectations on returns, risks, and timelines

5. Maintain Discipline: Pass on deals outside criteria, even when attractive

6. Scale Thoughtfully: Master 2-3 deals before expanding to 10+ annually

7. Leverage Technology: Automate operational tasks to focus on investment decisions

8. Document Everything: Compliance and suitability documentation protects firm and clients

For GPs Seeking to Engage Wealth Managers:

1. Understand Their Constraints: Wealth managers have different timelines and resources than institutions

2. Provide Turnkey Solutions: Make it easy with standardized documents and clear processes

3. Enable Fast Execution: Support 48-72 hour decision windows with complete information upfront

4. Communicate Proactively: Regular updates reduce workload and strengthen relationships

5. Consider Their Clients: Structure terms and timelines appropriate for retail investors

6. Leverage Technology: Use platforms that streamline subscription and reporting

7. Be Transparent: Share both good news and challenges openly

8. Create Liquidity Options: Recognize retail LPs need shorter horizons than institutions

Conclusion

Co-investment access represents a fundamental shift in how wealth managers serve high-net-worth clients. What was once exclusive to institutional investors and the ultra-wealthy is now accessible to affluent families through aggregated capital structures and technology-enabled platforms.

The Market Opportunity is Clear:

• $56 trillion in household assets with only 2-3% allocated to alternatives

• 18,000 private companies over $100M revenue in the US vs 3,000 public companies

• Fee savings of 3-4% annually vs traditional fund structures

• Client demand driven by desire to own innovative companies like OpenAI, SpaceX, and Anthropic

Success Requires Intentional Design:

• Clear investment strategy and documented criteria

• Deep relationships with trusted GP partners

• Robust operational infrastructure and technology

• Thorough client education and expectation setting

• Disciplined portfolio construction and risk management

• Regulatory compliance and fair allocation policies

The Time to Act is Now:

• Private markets are professionalizing retail access

• Technology platforms are eliminating traditional friction

• GPs are actively seeking wealth manager partnerships

• Early movers establish competitive advantages

• First-mover wealth managers build reputation and track records

The wealth managers who successfully build co-investment programs today will define the industry standard for the next decade. Those who wait risk losing clients to competitors offering superior alternative investment access.

"There's a mega wave of private wealth going into private asset classes. There's call it 3 trillion, which is roughly one-fifth of the private equity AUM, and that's expected to double in the next 5 years."

- Hugues Lalancette

The democratization of co-investment access is not coming—it is already here. The question is whether your firm will lead this transformation or be left behind.

About Vessel

Vessel is the leading AI-powered operating system for venture fund managers—modernizing every touchpoint in the GP-LP lifecycle, from fundraising to reporting to ongoing investor engagement. With built-in co-investment and fundraising workflows, Vessel replaces scattered tools with a single end-to-end platform that runs your fund faster, cleaner, and more transparently. Teams using Vessel typically cut investor-relations admin by 70–80%, freeing partners to spend more time on deals and LP relationships.

Learn how Vessel can help you launch or scale your co-investment program: Book a demo!

Additional Resources

Industry Research:

• Cambridge Associates: 2025 Outlook: Private Equity & Venture Capital

• KPMG: Q3 2025 Venture Pulse Report – Global Trends

• Bain & Company: Global Venture Capital Outlook

• Preqin: Private Capital Quarterly Review

• PitchBook: Private Markets Benchmarks

Regulatory Resources:

• Canadian Investment Regulatory Organization (CIRO) Alternative Investment Guidelines

• Ontario Securities Commission (OSC) Accredited Investor Requirements

• Autorité des marchés financiers (AMF) Prospectus Exemptions

Educational Content:

• National Venture Capital Association (NVCA) Industry Resources

• Institutional Limited Partners Association (ILPA) Best Practices

Document Version: 1.0

Last Updated: December, 2025

Target Audience: General Partners (GPs), Limited Partners (LPs), Wealth Advisors, Venture Capitalists

Definitions and Glossary

Accredited Investor: Individual meeting specific income ($200K+ annually) or net worth ($1M+ financial assets in Canada) thresholds qualifying them to invest in private securities.

Carried Interest (Carry): Percentage of investment profits paid to general partners as performance-based compensation, typically 20% for funds and 5-10% for co-investments.

Co-Investment: Direct investment in a specific company made by limited partners alongside a general partner's main fund, typically through a separate vehicle with reduced fees.

DPI (Distributions to Paid-In Capital): Ratio of cash distributions received divided by total capital invested, measuring actual realized returns.

General Partner (GP): Active manager of a venture capital or private equity fund responsible for sourcing deals, making investment decisions, and managing portfolio companies.

IRR (Internal Rate of Return): Annualized time-weighted return accounting for timing of all cash flows (investments and distributions).

Limited Partner (LP): Passive investor in a venture capital or private equity fund who provides capital but does not participate in management decisions.

MOIC (Multiple on Invested Capital): Total value (realized and unrealized) divided by total capital invested, measuring gross return without considering timing.

Pari Passu: Latin term meaning "equal footing," indicating that co-investors receive the same economic terms and rights as the general partner's main fund.

SPV (Special Purpose Vehicle): Legal entity created for a specific co-investment transaction, allowing multiple investors to pool capital and invest together.

TVPI (Total Value to Paid-In Capital): Sum of DPI and RVPI, representing total value (realized cash plus unrealized holdings) divided by total invested capital.

Vintage Year: Year in which a fund makes its first investment, used for performance comparison across similar-aged funds.

Frequently Asked Questions (FAQs)

Q: What is the minimum investment amount for co-investment opportunities?

A: Institutional co-investment minimums typically range from $5M to $25M per deal. However, wealth managers can aggregate client capital to meet these minimums, allowing individual clients to participate with investments as low as $100K to $250K. The optimal minimum for individual clients is $100K-$150K to ensure proper portfolio diversification (8-12 positions minimum recommended).

Q: How long will my capital be locked up in a co-investment?

A: Expected hold periods vary by company stage:

• Early stage (Seed to Series A): 7-10 years

• Growth stage (Series B/C): 5-7 years

• Late stage (Series D+ / Pre-IPO): 2-4 years

• Secondary investments: 1-3 years remaining

Actual timelines depend on company performance and exit opportunities. Secondary markets provide some liquidity options before company exit, typically at 70-90% of last funding round valuation.

Q: What fees do I pay on co-investments vs traditional VC funds?

A: Fee comparison:

Traditional VC Fund:

• Management fee: 2.0% of committed capital (first 5 years), then 2.0% of invested capital

• Carried interest: 20% of profits above hurdle rate

• Total fee drag: ~6-8% over fund life

Co-Investment:

• Management fee: 0-0.5% of invested capital

• Carried interest: 5-10% of profits (often zero)

• Total fee drag: ~1-2% over hold period

Fee savings translate to approximately 3-4% higher annual returns on co-investments vs funds, assuming similar underlying performance.

Q: How do I know if a co-investment opportunity is legitimate?

A: Verify legitimacy through:

✅ GP track record verification (check GIPS-compliant returns if available)

✅ Reference calls with existing LPs

✅ Verification that GP manages institutional capital ($100M+ AUM)

✅ Review of GP's fund documentation and regulatory filings

✅ Background checks on key GP team members

✅ Legal review of investment documents

✅ Independent valuation of company (when possible)

Red flags:

❌ GP has no established track record or verifiable returns

❌ Pressure to invest immediately without due diligence time

❌ Guaranteed returns or no risk disclosures

❌ Multiple layers of fees not clearly disclosed

❌ GP unwilling to provide detailed information

❌ No other institutional investors participating

Q: What returns should I expect from co-investments?

A: Target net IRR ranges by strategy:

• Venture capital co-investments: 25-35% IRR (but high variance)

• Growth equity co-investments: 20-28% IRR

• Buyout co-investments: 18-25% IRR

These targets reflect:

• Top quartile performance expectations

• Fee savings vs traditional funds

• Selection benefit from GP's highest-conviction deals

Reality check: Not all investments meet targets

• Success rate (>1x return): 60-75% of investments

• Home runs (>5x return): 20-30% of investments

• Losses (<0.5x return): 10-20% of investments

One or two home run investments typically drive majority of portfolio returns (power law distribution in venture capital).

Q: What are the main risks of co-investing?

A: Primary risks include:

Concentration risk: Single-company exposure vs diversified fund means higher volatility and potential for total loss

Illiquidity risk: Capital locked up for 3-10 years with limited options for early exit

Valuation risk: Private company valuations are estimates and can differ significantly from eventual sale price

Information asymmetry: Less frequent reporting and lower transparency than public companies

GP dependency: Success depends on GP's continued engagement and competence

Market timing risk: Entering at peak valuations can result in down rounds and impaired returns

Mitigation strategies: Diversify across 8-12+ co-investments, 3-5 GPs, multiple sectors and vintages. Maintain co-investments at 30-40% of alternative allocation (not 100%).

Q: How do I handle a co-investment that's performing poorly?

A: Steps to take:

Assess situation:

• Request detailed update from GP on issues and remediation plans

• Understand whether challenges are temporary or structural

• Evaluate probability of recovery vs continued decline

• Compare to initial investment thesis and current reality

Consider options:

• Hold: If challenges are temporary and GP has credible plan

• Sell in secondary market: If need immediate liquidity (expect 30-70% discount)

• Write down: Adjust expectations and valuation for planning purposes

• Wait for additional information: Sometimes patience is optimal

Communication:

• Proactively inform clients of situation

• Provide context and GP's perspective

• Acknowledge uncertainty while avoiding panic

• Remind of diversified portfolio approach

Learn lessons:

• Document what went wrong for future due diligence

• Assess whether GP's handling of crisis meets standards

• Determine if relationship with GP should continue

• Share learnings with team and peer advisors

Important: Not every investment succeeds. Losses are part of venture investing. Focus on overall portfolio performance, not individual winners/losers.

Q: How do I get started offering co-investments to clients?

A: Step-by-step launch process:

Phase 1 (Months 1-2): Foundation

• Define investment strategy and criteria

• Establish compliance and legal framework

• Build initial GP relationships (start with 2-3)

• Identify 10-15 qualified clients as pilot group

Phase 2 (Months 3-4): Infrastructure

• Select and implement technology platform

• Create template documents and communications

• Train team on process and system

• Conduct client education sessions

Phase 3 (Months 5-6): Pilot

• Execute 1-2 co-investments with pilot group

• Refine processes based on learnings

• Document lessons and update procedures

• Gather client feedback

Phase 4 (Months 7-12): Scale

• Expand to broader client base

• Add GP relationships (target 5-10 total)

• Increase deal velocity (4-6 per year)

• Build performance track record

Start small, learn quickly, scale thoughtfully.

Q: What technology platform should I use?

A: Platform selection criteria:

Must-have features:

• Subscription document automation

• Electronic signature integration

• Capital call and distribution processing

• Portfolio reporting and analytics

• Integration with your custodian

Nice-to-have features:

• Portfolio KPI monitoring capabilities

• KYC / AML functions

• Visual and interactive portal for LPs

• Tax document generation (K-1, T5013)

• Clean and simple UX for LPs

Leading platforms:

• Vessel: Purpose-built for co-investment workflow

• iCapital: Comprehensive alternative investment platform

• Opto: Family office and wealth manager focused

• Moonfare: Fund and co-investment marketplace

• AngelList: Venture/startup focused

Decision factors:

• Your co-investment program size (AUM)

• Number of clients participating

• Integration requirements

• Budget ($15K-$100K+ annually)

• Implementation timeline (8-16 weeks)

Recommendation: Start with the platform that meets your immediate needs, then migrate later if needs evolve.

Q: How do I handle clients wanting to exit a co-investment early?

A: Liquidity options:

Option 1: Secondary Sale

• Sell client's position to another investor

• Typical pricing: 70-90% of last funding round (30-10% discount)

• Timeline: 2-6 months to find buyer and close

• Best for: Clients with changed circumstances, urgent liquidity needs

Option 2: GP-Facilitated Liquidity

• Some GPs run tender offers or continuation funds

• Usually offered every 2-3 years for mature companies

• Pricing at or near fair market value

• Limited capacity (not all shareholders can participate)

Option 3: Wait for Company Exit

• IPO, acquisition, or other liquidity event

• No discount to fair value

• Timeline uncertain (could be 1-5+ years)

• Best option if client can wait

Recommendation: Set expectations upfront that co-investments are illiquid. Secondary sales are available but involve discounts. Structure portfolios to minimize need for early exits.

Q: How are co-investment returns taxed?

A: Tax treatment (Canada):

Capital gains:

• Profits from co-investments typically taxed as capital gains

• 50% inclusion rate (only half of gain is taxable)

• Holding period >1 year generally required

Flow-through taxation:

• Co-investment SPVs typically structured as partnerships

• Income/losses flow through to investors

• Reported on T5013 tax form

RRSP/TFSA treatment:

• Co-investments generally NOT eligible for registered accounts

• Reason: Private companies lack sufficient liquidity

• Exception: Some publicly-traded venture funds offer similar exposure

Foreign withholding tax:

• US-based investments may have 30% withholding on dividends

• Reduced to 15% under US-Canada tax treaty

• Foreign tax credits available to offset

Recommendation: Consult tax advisor for personal situation. Tax treatment can be complex with partnership structures.

Q: When do I receive tax documents?

A: Tax document timeline:

K-1s (US investments):

• Due date: March 15 (for prior calendar year)

• Often delayed until late March or early April

• Late K-1s can delay personal tax filing

T5013s (Canadian investments):

• Due date: March 31 (for prior calendar year)

• Timing similar to K-1s

Planning considerations:

• File tax extension if co-investment K-1s are late

• Budget 2-3 weeks after K-1 receipt for tax prep

• Technology platforms can accelerate delivery by 2-4 weeks