In the first half of 2023, global private equity deals faced a significant decline, while co-investments stood out as a resilient strategy. This resurgence is driven by the exit of 'tourist' co-investors due to liquidity issues and a growing demand from General Partners (GPs) looking to secure committed capital in a reduced debt availability environment. Adding to this evolving landscape, continuation vehicles have emerged as competitors to traditional co-investments, offering a fresh approach to securing returns.

While valuations remain high across several sectors, especially in technology, businesses with robust revenue models and pricing power continue to command premium prices. Additionally, healthcare, asset management, insurance brokerage, and certain resilient sectors maintain high valuations. Infrastructure co-investment is gaining momentum due to its alignment with inflation and downside protection, while digital infrastructure investments attract attention.

Providing follow-on capital for bolt-on acquisitions introduces unique challenges, requiring alignment and diligence. Risk mitigation in co-investment is achieved through diversification across GPs, geographies, and industries. Despite the challenges, co-investments offer a promising strategy due to lower fees and the potential for risk-adjusted returns, contingent on a nuanced approach and robust industry relationships . In summary, co-investments are experiencing a revival, offering both liquidity and diversification in high-valuation sectors driven by the need for liquidity and the increasing appeal of continuation vehicles. . Success depends on a well-balanced strategy and strong industry connections.