Hedge Fund Co-Investments

Co- and direct investments is where the puck is going in a big way.

"Hedge fund co-investments are potentially attractive for allocators as they offer access to high-conviction ideas with lower fees and potentially enhanced returns. Our approach has been to establish a true partnership with our co-investors by identifying a series of trades within a certain sector or of a certain nature, and then pursuing those trades collectively to their benefit" says  David Dunn  , Co-Managing Partner and Co-CIO, at Cross Sound Management LLC. "We believe finding investments that are uncorrelated to the market and to other hedge fund holdings is an attractive proposal for our co-invest partners. Also, we've found that an engaged co-investor can be a value-add to us. I can think of one particular institution that we do business with that does add value to a lot of our trades and we actually derive benefit from having their team join us at a meeting or on a conference call because they have differentiated ideas. This is an unexpected, but certainly welcomed benefit of the co-investment construct that we are seeing."

Please review the attached document for more information on the recent  Opalesque  Roundtable on Co-Investments which covers the following topics:

• Which are the three  main reasons or motivations for a co-investment  ? (page 6, 7). 
• Liquidity considerations   for co-investments (page 8).   Typical fee arrangements   for co-investments (page 9, 24-25).
• Due diligence and questions to ask when reviewing a co-investment  (page 18)  . How to deal with the potentially higher volatility of co-investments  (page 9, 11)  . Portfolio construction with co-investments  (page 19).  What can go wrong and lessons learned. Risk in co-investments and how to mitigate it  (page 22-25).
• The role of   manager selection   (page 12, 15). What is   the ideal co-investor   (co-investment partner selection)? (page 12, 13, 18).   Sourcing of co-investments   (page 14, 15).
• Institutional allocators often develop teams for co-investments  . How do managers view their expertise? (page 11). Why   family offices and high net-worth investors   are welcome co-investors (page 17).
• Governance and best practices   in co-investments (page 13-15). Process and infrastructure considerations for co-investments (page 14, 21).
• Co-investment funds of funds:   Why commingling co-investments can ultimately be attractive. The opt-in structure (page 19-22).