The Power of Co-Investing: A Data-Driven Look at Emerging Manager Success, March 2025
For emerging fund managers, success isn’t just about raising capital—it’s about finding creative ways to punch above their weight class with limited resources. Emerging managers are typically managing relatively small funds, so they need to be strategic in how they put capital to work and grow their AUM. Enter co-investing — a strategy that not only enables fund managers to increase their check sizes but also deepens LP engagement and provides additional revenue streams.
This report examines the growing role of co-investment vehicles among emerging managers. While co-investing can refer to a variety of investing strategies or structures, for the purpose of this article, we use it to refer to situations in which a manager of a committed capital fund uses a Special Purpose Vehicle (SPV) to make an investment into a company alongside their fund. Managers may use co-investments to bring in outside, non-fund investors or to offer additional deal-by-deal exposure to fund investors.
Emerging managers have increasingly adopted co-investment vehicles over the past several years to scale AUM, drive investor engagement, and generate additional income streams. Through an analysis of Sydecar’s platform data, we’ll show you how co-investing can help emerging managers punch above their weight, strengthen LP relationships, and win competitive deals.
Co-Investing as a Growth Strategy
Emerging managers operating small funds often find themselves competing for the best investment opportunities. Without additional capital and platform resources at their disposal, they may struggle to secure allocations in competitive deals, where founders prioritize not just check size but also strategic value, network access, and the potential for a long-term relationship. On Sydecar’s platform, nearly one in four emerging fund managers are actively using co-investment vehicles, demonstrating how this approach gives them more capital to invest in promising opportunities.
To better understand co-investment trends among emerging managers, we analyzed a sample of 37 deals on Sydecar’s platform. Across these deals, managers collectively raised over $10.4M, demonstrating how co-investing is used to scale impact and deepen LP engagement.
Additionally, managers who co-invest were able to increase investment allocation by 28%*. While this does not directly equate to higher fund performance, it gives managers the ability to strengthen their portfolio composition and deepen relationships with founders. Through their co-investment strategy, these fund managers can write larger checks and secure greater exposure to their most promising investments.
*This excludes the top managers who are outliers, whom we discuss in the next section. With them included, the average additional allocation is 509% per deal.
Power Players Are Leading the Way
While co-investing is broadly valuable, the data highlights that some managers lean into this strategy more than others. Sydecar observed a trend among a subset of emerging managers in our sample who used co-investment vehicles in 65% of the analyzed deals, raising a majority of the $10.4M. Their outsized use of these vehicles suggests that once fund managers unlock the potential of co-investing at scale, they integrate it deeply into their investment approach.
For these power players, co-investing is a core component of their fund strategy. They have built repeatable models that allow them to extend capital efficiently, secure strong deal positions, and provide additional opportunities for their LPs and outside investors. Their success underscores that emerging managers who incorporate co-investing into their fundraising playbook early can establish themselves as better capital deployers.
Beyond Capital Deployment: The Financial Upside of Co-Investing
Beyond its role in securing allocations, co-investing also provides a secondary benefit of helping managers generate additional fees, which can be particularly useful for emerging managers looking to offset operational costs or extend their personal runway while they scale their fund. On Sydecar’s platform, 36% of co-investment deals charged management fees, with an average fee of 1.15%. While lower than the 3.06% average fee across all deals on the platform, these fees still create meaningful income, especially for Fund I managers operating without significant AUM. Co-investment vehicles allow managers to not only extend their capital deployment but also improve their financial sustainability by offsetting operational costs.
Beyond the financial benefits, co-investing plays a crucial role in strengthening LP relationships. Many investors appreciate the option to selectively participate in deals outside the main fund structure, giving them increased exposure to high-conviction investments while maintaining control over their commitments. To encourage repeat participation, fund managers on Sydecar’s platform set co-investment fees strategically, ensuring they remain attractive to LPs. By keeping fees reasonable, managers create an environment where LPs are more likely to reinvest in future opportunities, ensuring a steady pipeline of capital for both fund and co-investment deals. Prioritizing long-term LP engagement over short-term revenue maximization reinforces co-investing as a strategy that benefits both fund managers and their investors.
Looking Ahead: The Role of Co-Investing
The data is clear—co-investing is no longer just a secondary option for emerging managers. It is an important strategy for securing stronger deal flow, strengthening LP relationships, and generating income.
As more emerging managers recognize the benefits of co-investing, those who embrace it early will establish themselves as more competitive investors. The most successful managers aren’t just raising capital; they are building scalable, sustainable investment businesses.
Sydecar’s Fund+ makes co-investments seamless, allowing managers to easily invite outside investors to participate in deals while maintaining a single line on a portfolio company’s cap table. By consolidating commitments into a single vehicle, managers can deploy more capital into exciting deals, increase value-add to founders, and ultimately win more allocations. With automated tracking, reporting, and regulatory compliance baked into the platform, Sydecar removes the administrative burden, allowing fund managers to focus on what truly matters—making great investments and strengthening LP relationships.
Ready to see how Fund+ can support your co-investment strategy? Visit the Fund+ page and explore our interactive demo today:
