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October 23, 2015

Foundations and Endowments Eye Private-Equity Co-Investments

Nonprofit institutional investors are increasingly weighing "co-investments" in which they put up money alongside a private equity firm rather than simply committing more money to the firm's equity funds, The New York Times writes, citing a new study by Boston investment consulting firm NEPC.

The survey of 58 foundations and endowments found that 23 percent of respondents currently use such side deals with equity firms, and 12 percent are considering doing so. The latter number has been rising in recent years, NEPC's Kristin Reynolds said.

Private-equity firms typically offer co-investments in a particular sector of interest to larger clients. The fees charged in such deals can be considerably lower than those for investing in a fund, and foundations and endowments believe they can yield higher returns and better access to top fund managers, the NEPC survey found.