Private Markets: Investors Favor Direct Deals

A significant shift is underway in private markets, with investors increasingly prioritizing direct stakes in companies over traditional fund allocations. This move is driven by a desire for greater transparency, enhanced control, and potentially superior returns, challenging the established model of blind pool commitments. The trend is evident across investor types, from large institutions like pension funds and insurance companies to family offices and even smaller allocators.

This burgeoning interest in co-investments and direct deals allows investors to bypass the opaque nature of blind-pool funds. Instead of committing capital without knowing the specific underlying assets, participants can now select individual opportunities. For instance, in the 2023 Silverlake acquisition of Qualtrics for $12.5 billion, a variety of limited partners (LPs) joined as co-investors. Similarly, in 2025, Montagu and Astorg brought in LGT Capital Partners for follow-on funding in the drug delivery firm Nemera, showcasing a collaborative approach to capital deployment.

The appeal of direct investing lies in several key advantages. Firstly, it offers individual company selection, enabling investors to align their capital with specific businesses they understand and believe in, as exemplified by LGT Capital Partners' long-standing interest in Nemera. Secondly, it provides more control over exposures, allowing for granular portfolio construction and the ability to overweight high-conviction sectors or geographies. Data from an Adams Street survey in 2026 indicated co-investments were the most attractive route for institutional investors, surpassing secondaries and venture capital.

Furthermore, direct investment pathways often come with lower fees. By participating directly, investors can avoid the management fees and carried interest typically associated with primary fund investments, thereby boosting net returns. While definitive performance data is still evolving, anecdotal evidence suggests outperformance. For example, research on CalSTRS' private equity co-investments indicated they outperformed its fund investments across multiple time horizons, partly attributable to reduced costs.

Beyond financial benefits, co-investments can offer opportunities to add value, particularly for investors with specialized expertise. In the 2024 EQT deal to acquire Nord Anglia Education for $14.5 billion, Neuberger Berman joined as a co-investor and was recognized as a strategic partner, suggesting an active role in the company's development. This hands-on involvement can also strengthen GP relationships, providing LPs with direct insight into a general partner's operational capabilities and investment acumen.

The infrastructure supporting this trend is also expanding. While some sophisticated LPs can arrange direct co-investments independently, the complexity and need for robust deal flow access have spurred the growth of dedicated co-investment funds. These vehicles, which raised a record $43.4 billion in 2025 according to PitchBook, are democratizing access, offering diversified exposure and streamlining the co-investment process for a broader range of investors. This evolution signals a fundamental reshaping of how capital is deployed and managed within the private markets ecosystem.