Co-investment has become a standard feature of private credit fundraising, with investors increasingly expecting the option to deploy capital alongside a fund on a deal-by-deal basis. For sponsors, the attraction is clear: co-investment can widen the pool of available capital and strengthen relationships with key investors. It also, however, introduces a set of structuring and governance questions that sponsors should address at the outset rather than deal by deal.

Fee and carry treatment for co-investment vehicles is often the first point of negotiation, and inconsistent treatment across a sponsor's investor base can create friction later in a fund's life. Allocation policies need to be clear, defensible and applied consistently, particularly where demand for a co-investment opportunity exceeds supply. Sponsors should also consider the practical mechanics of syndication timelines, which can be difficult to reconcile with the speed required to close credit transactions.

We increasingly advise sponsors to agree a co-investment framework in advance of fundraising, rather than negotiating bespoke terms with each investor as opportunities arise. This reduces execution risk at the point of transaction and gives investors greater certainty about how allocation decisions will be made.