Blog Series Part 3: Co-Investment Terms: Alignment, Access, and Risk

March 2025

Blog Series: Private Fund Terms That Matter
Part 3: Co-Investment Terms: Alignment, Access, and Risk

Co-investments are a valuable tool. They give limited partners the chance to increase exposure to specific deals, often with better economics, while fund managers benefit from capital flexibility and deeper LP engagement. But without the right structure and legal clarity, co-investments can create confusion, slow down execution, and strain internal resources. At Moeller Law PLLC, we help private fund managers design and document co-investment arrangements that are aligned with the fund’s operations, scalable as the platform grows, and clear enough to hold up under investor and regulatory scrutiny. As outsourced general counsel, we bring legal guidance and cross-functional coordination to what is often a high-touch and high-risk part of the capital raising and deployment process.

The Growing Importance of Co-Investments

In the early stages of a fund’s life cycle, co-investment opportunities may be rare or handled informally. But as the platform matures, the volume and complexity of co-investments tend to increase. Institutional investors often ask about allocation processes, access terms, and documentation standards. Fund managers, in turn, need to be prepared with clear, consistent answers and reliable internal processes. The informal approach that worked for a first-time fund rarely scales well. Without a framework, managers may end up promising conflicting rights to different investors, scrambling to form SPVs under time pressure, or improvising tax or governance terms that don’t reflect the underlying deal structure.

Common Pitfalls and How to Avoid Them

We have reviewed co-investment terms that are either too vague or too rigid. For example, some LPs receive loosely worded “preferred access” provisions without defined participation criteria or timing. Others are granted rights through side letters that become operationally unworkable when real deals arrive. These inconsistencies can cause delay, misaligned expectations, and tension with other investors or internal stakeholders. Tax and regulatory considerations are also frequently overlooked. Co-investments often involve pooled vehicles, direct equity participations, or unique reporting needs. If these issues aren’t addressed upfront, the fund may face problems with allocation, disclosure, or adviser registration thresholds. The most effective co-investment structures are those that balance flexibility with clarity. Fund managers should have discretion, but they also need a repeatable process and consistent documentation.

How Moeller Law PLLC Supports Your Co-Investment Strategy

We advise fund managers on structuring and managing co-investment programs from both a legal and operational perspective. That includes reviewing or drafting investor-side language, assessing consistency with fund documents, and coordinating with fund counsel and administrators when SPVs or parallel vehicles are involved. We also help align communications and disclosures across your investor base and ensure that co-investment activity stays in sync with regulatory obligations and internal governance. As outsourced general counsel, our role is not only to draft but also to manage — to ensure that co-investment terms are deliverable, enforceable, and consistent with your platform’s broader strategy and investor relationships.

Co-investments can strengthen LP relationships and unlock capital for high-conviction opportunities, but they require more than good intentions and informal conversations. A thoughtful, well-structured co-investment process reduces risk, builds trust, and ensures you can act quickly when the right deal appears. Moeller Law PLLC partners with private fund managers to develop co-investment terms and processes that work across legal, operational, and investor-facing dimensions. If you're expanding your platform or updating your co-investment approach, we're ready to help.

Let’s connect to talk about aligning your co-investment strategy with the demands of your fund and the expectations of your investors.