The Co-Investment Model
To reduce the massive fee drag of traditional "2 and 20" private equity models, sophisticated funds like Mubadala and ADIA have pivoted heavily toward co-investments.
By offering to write massive equity checks ($500M+) directly alongside a private equity sponsor on a specific deal, sovereign funds gain fee-free or reduced-fee exposure to premium US assets while the sponsor gets the necessary capital to win mega-buyouts.
Co-Investment Fee Savings Modeler
A $100M co-investment at a 0% carry (vs traditional 20% carry) saves $20M in fees on a 2x gross return, illustrating the massive draw of the co-investment model for sovereign funds.
Sector Deep Dive & FAQ
Common Mistakes
- Assuming all Abu Dhabi funds share the same risk mandate.
- Overlooking the impact of CFIUS on direct equity ownership.
- Treating ADQ's operational focus as standard private equity.
Frequently Asked Questions
- What is the scale of these investments?
- As of Q1 2024, combined estimated AUM exceeds $1.5T.
- Why the US market?
- Unmatched depth, liquidity, and access to deep tech.
Worked Example: Co-Investment Sizing
If a sovereign fund commits $500M directly alongside a US sponsor in a mega-buyout (bypassing the standard 20% carry on a 2x return), they save approximately $100M in performance fees.
Source: Proprietary estimates based on 2023 mega-fund structures.
Natural Next Step
To understand how these funds mitigate regulatory friction when deploying this capital, review our guide on Navigating CFIUS.