Co-investments gain ground among family offices for alts plays

Single-family offices in Asia are progressing in moving beyond direct investments to co-investments as they re-evaluate their work processes and eye investments outside their core areas of expertise, two single family offices told AsianInvestor.

“I like co-investing with other families, that’s more strategic and offers many benefits,” said Vishal Harishchandra, owner of single-family office Valkin Group.

Valkin Group operates across Singapore, Hong Kong, New York, and London.

Co-investments have over the last few years emerged as a popular alternative to traditional private equity vehicles. 

It allow investors to invest directly with private equity funds, offering more visibility, transparency, control, and a choice to back specific deals with the potential for higher returns.

This is unlike the traditional PE funds, where investors commit capital to a strategy, without knowing the exact acquisitions.

THE MORE THE MERRIER

Golden Vision Capital, the investment arm of a Singapore based single-family office, also sees co-investment as one of its primary strategies as it invests in private equity.

“One major advantage of co-investing is [in helping to] expand our investment universe.  It allows us to broaden our spectrum of industry and geographic regions, including areas outside our immediate reach,” Riady Gozali, managing director at Golden Vision Capital, told AI.

The family office, through co-investment, has been able to access higher returns opportunities that were otherwise inaccessible.

Its co-investment approach is overall stage- and size-agnostic.

However, for late-stage companies in Series B and beyond, where the round size is larger, participating as an individual investor may not be feasible. In such cases, joining a syndicate provides better access to these investment opportunities.

"Companies might not want too many investors on the cap table,” shared Gozali.

Harishchandra agrees. “A big benefit is access to bigger and better opportunities that you might not have as a single family. Whether it's four or five families or even fifty, you gain access to better deals.”

For family offices, this is also a way to gain expertise in sectors they may not have direct deep knowledge of.

“It’s beneficial to co-invest with a family experienced in the sector you want to enter because they know the business and have made money in it, which adds value and usually gives better returns,” explained Harishchandra.

For Gozali, it helps with due diligence, especially for sectors where valuation and potential aren't just based on traditional metrics. “Specialised knowledge in areas like AI, medicine, novel materials, or renewables can be immensely helpful,” he said.

Shared resources are another key benefit as the cost associated with deal evaluation and setting up investment vehicles etc is better managed.

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DIRECT VERSUS VEHICLE

Co-investment typically involves investing through a structured vehicle, but when investing directly in the company's ownership structure, it is referred to as investing alongside.

“In areas where we are very familiar, have direct access, and have control, there’s no reason to invest through other special purpose vehicles, as it adds an unnecessary layer and cost. In such cases, we prefer to invest directly on the cap table, not through a vehicle,” shared Gozali.

Golden Vision Capital also collaborates with other family offices that invest in its vehicle, enabling direct investment.

“We sometimes just collaborate during the evaluation and due diligence phases. If we find that we are comfortable with our access and understanding of the business, we prefer to go alone,” he explained.

Just like any other investment, finding the right partners to co-invest with is critical. Both family offices place a high emphasis on the reputation of the partners.  

“Word of mouth and reputation, I would say, is the starting point of the relationship,” said Harishchandra.

Gozali shared that alignment of interest is also critical, from a buy-side perspective. "The terms and positioning should ensure a win-win situation, but the primary focus must be on buy-side alignment.”