In a recent ION Influencers Fireside Chats, Marshall Bartlett, Managing Director at Fisher Lynch Capital (FLC), to explore the rise of private equity co-investments and the evolving dynamics between sponsors, LPs, and co-investment managers.

Key Topics Discussed

1. Marshall Bartlett Background and Fisher Lynch Capital’s Focus

• Decades-long career in private equity investing.

• Joined FLC nearly 18 years ago and serves on the executive and investment committees.

• FLC is one of the largest firms dedicated exclusively to co-investments, managing ~$10B AUM.

• Founded 20+ years ago by ex-GIC leaders who pioneered co-investing as a strategy.

• Offices in Boston, San Francisco, and London.

2. What is a Co-Investment?

• Direct investment into a private company alongside a private equity sponsor, instead of via a traditional PE fund.

• Avoids fund-level fees and carry (typically 1.5–2% + 20%).

• A cost-efficient way for LPs to access private equity and improve net returns.

3. The Evolution of Co-Investing (Last 20+ Years)

• Once a niche strategy, now a $100B+ annual market.

• Growth driven by:

  • LPs recognizing the benefits of fee savings and transparency.

  • GPs offering co-investment to strengthen LP relationships and avoid “club deals” with competing sponsors.

• Market has grown 50x faster than private equity overall in the past 25 years.

4. Building Strong LP Relationships

• FLC limits the number of LP relationships to ensure partner-level access.

• LPs are treated as extensions of the FLC team, not just investors.

• Frequent touchpoints: weekly calls, standing monthly meetings, and regular in-person updates.

• LPs benefit from insights into sponsor practices by co-investing in live deals.

5. Keys to Strong Deal Flow

• Two critical drivers:

  1. LP commitments to primary funds → GPs prioritize co-investment opportunities for key LPs.

  2. Being a value-add co-investor → responsive, commercial, transparent due diligence, and flexible structuring.

• Creates a virtuous cycle of repeat deal flow.

6. Skills Needed for Co-Investments vs. Fund Investing

• Different skill sets: evaluating individual companies vs. fund managers.

• Requires direct deal experience, sector knowledge, and ability to work under compressed timelines.

• FLC teams (4–5 people per deal) handle multiple transactions simultaneously.

• Junior team members play an active role in due diligence and LP communications, building the next generation of leaders.

7. Due Diligence Under Pressure

• Benefit: leverage the sponsor’s deep diligence.

• FLC overlays its own focused, risk-driven analysis.

• Prioritizes the key drivers of deal outcomes, especially under tight deadlines (sometimes one week).

8. Alignment and Structuring in Co-Investments

• Co-investors are minority investors → alignment with sponsors is crucial.

• Protective structures include: tag-along/drag-along rights, minority protections, and aligned securities.

• Strong documentation ensures LPs move in lockstep with sponsors at exit.

9. Emerging Structures: Continuation Vehicles (CVs)

• A fast-growing part of the secondary market.

• Allows sponsors to move portfolio companies into a new SPV to extend hold periods.

• LPs can roll or sell, but most sell (80–90%).

• CVs offer co-investment-like exposure, though fee savings may be limited.

• Trend blurs the line between secondaries and co-investments.

10. Risks in Co-Investments

• Risks span:

  • Company-level (industry, competition, management).

  • Financial/transaction (valuation, leverage, exit options).

  • Portfolio construction (diversification, pacing, vintage year exposure).

  • Operational execution (compliance, tax, administration).

• Success requires strong processes, experienced teams, and disciplined portfolio management.

11. Macro Risks and Market Outlook

• Current environment: high valuations, economic uncertainty, geopolitical tensions, elevated inflation.

• Key takeaway: private equity cannot be timed.

• The best approach is measured deployment, rigorous diligence, and consistent capital allocation across cycles.

Key timestamps:

00:08.32 Introduction to ION Influencers Fireside Chats
03:17.68 Evolution of Co-Investments
06:45.82 Building Relationships with Limited Partners
08:50.54 Generating Deal Flow for Co-Investments
10:58.00 Skills Required for Co-Investment Teams
14:32.50 Due Diligence in Co-Investments
16:28.10 Aligning Interests with Limited Partners
17:53.34 Emerging Structures in Co-Investment
20:09.26 Correlation Between Co-Investments and Secondaries
23:36.69 Understanding Different LP Strategies
26:26.17 Navigating Macro Economic Trends
28:11.11 Conclusion and Final Thoughts