Co-Investments: Dispelling the Myth of Adverse Selection

Key Takeaways

• Intuitively, lead GPs are significantly motivated to cultivate strong, long-tenured relationships with LPs; providing co-investment opportunities with less favorable prospects would be directly at odds with this primary objective
• Adams Street’s experience co-investing across multiple economic cycles demonstrates no evidence of adverse selection when comparing the performance of deals with co-investment opportunities to all deals completed by a lead GP
• The potential to deliver consistent outperformance requires more than high quality, unbiased deal flow. Co-investment managers with the perspective to assess alignment and transaction fit with the lead GP, and the ability to select only the most attractive investments, are likely best placed to outperform

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