In a ION Influencers fireside chat, Karin Hyland, Partner and Head of Co-Investment at Patria Investments, pulled back the curtain on the dramatic evolution of co-investments from a simple fee-saving tactic to a core, strategic pillar for sophisticated Limited Partners (LPs).

Representing a firm with $50 billion in AUM and a dedicated $2.5 billion European co-investment track record, Hyland detailed how the best LPs now operate like strategic partners to General Partners (GPs), leveraging data, sector expertise, and relentless efficiency to secure access to the most coveted deals.

Here are the key topics and takeaways for GPs and LPs navigating this competitive landscape.

The New Era of Co-Investment: From “Nice-to-Have” to “Must-Have”

Hyland outlined a clear evolution in the role of co-investments:

• The Fee-Blending Era: Initially, co-investments were primarily a tool for large LPs to dilute the “2 and 20” fee structure of their primary fund commitments.

• The Post-GFC Wake-Up Call: The Global Financial Crisis exposed the risks of “adverse selection,” where LPs were offered highly leveraged, underperforming deals. This forced LPs to become more discerning.

• The Strategic Present: Today, co-investment is a “must-have” for GPs struggling with fundraising and higher interest rates, and a strategic tool for LPs to exercise asset selection, go long on specific sectors, and build deeper GP relationships.

“The ability to offer your LPs co-investment is not just a nice-to-have now, it’s a must-have,” Hyland stated.

The LP Blueprint: How to Become the “Co-Investor of Choice”

So, how does an LP ensure they get the first call on the best deals? Hyland revealed Patria’s playbook:

1. Be a Frictionless, Reliable Partner: The key is reliability. “Do what you say you’re going to do… if there’s a timeline you have to meet, meet it.” This means conducting diligent but swift underwriting, sometimes in as little as four days.

2. “Co-Underwrite” and Get in the Trenches: The most valued LPs provide capital certainty during the deal process itself. “Supporting GPs in co-underwrite situations… coming in alongside the GP at the point that they’re doing the deal and they really need the capital” is invaluable.

3. Leverage a “GP-Led” Sourcing Machine: Patria’s co-investment success is intrinsically linked to its high-quality primary fund book. From their core GP relationships, they see 95% of the co-investment flow. This provides a top-of-funnel advantage that resource-constrained LPs cannot match.

The Data and Sector Moat: Beyond Capital

Hyland emphasized that writing a check is no longer enough. The most successful co-investors bring tangible, data-driven insights to the table.

• The “Patria Angle”: With 600 fund commitments and thousands of portfolio companies, Patria acts as a knowledge hub. They connect insights across their vast portfolio to help GPs, for example, by benchmarking valuations or identifying potential exit routes that a GP, focused on their local market, might not see.

• The Rise of the Sector-Specialist LP: Patria has built internal sector teams for Technology, Healthcare, and Financial Services. This allows them to move faster and with more authority. “Having an understanding of industries like… cell and gene therapy is a leg up that we have versus other LP co-investors who might have to spend a fortnight… just understanding what it is.”

The Future of Asset Management: Consolidation, Customization, and New Talent

Looking ahead, Hyland predicted several defining trends:

• Continued Consolidation: The trend of M&A among asset managers will persist.

• The Demand for Customization: The era of the purely commingled, blind-pool fund is waning. LPs are increasingly seeking customized solutions, with co-investment being a primary vehicle for this.

• The Democratization of Private Equity: Cracking the code on responsible retail access remains a huge challenge and opportunity for the industry.

• An Evolving Talent Pool: The next generation of investors will need technological skills (like AI proficiency) and operational expertise. Hyland advocates for hiring from diverse backgrounds—not just finance—to improve decision-making. “We need lots of voices around the table when we’re making decisions.”

Key Takeaways for the Industry:

• For GPs: The most valuable LPs are those who act as true partners—providing swift, reliable capital and strategic insights. Building a “transactional” relationship is a missed opportunity.

• For LPs: To compete for top co-investments, you must build a strategic, data-advantaged platform. For many, this means partnering with a specialized co-investment firm that has the scale, relationships, and sector depth they lack.

• The Bottom Line: In a competitive market, co-investment has matured into a sophisticated discipline where success is determined not by the size of the check, but by the strength of the partnership and the intelligence behind the capital.

Key timestamps:

00:06 Introduction to ION Influencers Fireside Chats
01:07 Focus on Co-Investments in Private Equity
01:43 Patria’s Investment Strategy Overview
02:18 Target Market: Lower Mid-Market Investments
02:50 Evolution of Co-Investments
03:36 Impact of the Global Financial Crisis
04:13 LPs’ Growing Sophistication in Co-Investments
04:51 Current Market Dynamics for GPs
05:28 Importance of Co-Investments in Private Equity
06:26 Flexibility and Reliability in Co-Investing
07:12 Evolution of Co-Investment Processes
07:57 Sourcing Strategies for Co-Investments
08:50 Integrating Primary and Secondary Investments
10:03 Performance Analysis of Co-Investment Strategies
11:29 Data Utilization in Co-Investment Decisions
12:33 Leveraging Insights Across Portfolios
13:24 Building Relationships Through Sector Expertise
14:28 Understanding Healthcare Investments
15:06 Sector Specialization in Investment Strategy
16:51 Strategic Relationships with Emerging GPs
17:32 Strategic Relationships Beyond Primary Capital
18:26 Market Dynamics: Sector and Geographic Specialization
20:08 Future Trends in Asset Management
22:04 Evolving Talent Landscape in Asset Management
23:48 Conclusion and Closing Remarks