Platforms and Vehicles for Institutional Co-­Investing

Abstract

A growing number of institutional investors, persistent in their desire to dis-intermediate and align interests with their portfolio managers, are turning away from external asset managers and are instead looking to one another for assistance. These direct investors are hoping to overcome the loss of agglomeration economies that asset managers enjoy within traditional financial centers by leveraging a new set of network economies through collaboration with peers. The over-arching question, however, is how these funds can actually co-invest to take advantage of these network effects in demonstrable ways. This can be quite challenging, as the differing return objectives and investment philosophies, not to mention the basic challenge of geography, all complicate matters. By highlighting a specific case study of co-investment and drawing on the qualitative data collected from over 20 on-site case studies of public pension funds and sovereign wealth funds around the world, this paper offers some insight as to how institutional investors can structure platforms and vehicles that will align interests and facilitate co-investment.

Keywords: Investment, Networks, Finance, Institutional Investor, Pension, Sovereign Wealth Fund