Research

Replicating the GP? Evidence on LP Value-Add in Co-Investments 

with Richard Maxwell

We study whether limited partners (LPs) create value when they move beyond their traditional role as capital providers and participate directly in start-up investments through co-investments. Using geographic proximity to start-ups as an instrument for LP involvement, we find that LP participation is associated with improved exit outcomes even after accounting for quality selection. We explore potential mechanisms, including the alleviation of financial constraints, enhanced monitoring, and the accumulation of expertise as LPs gain experience with repeated co-investments. We also examine the interaction between LP and GP expertise to assess whether performance improvements reflect exposure to skilled GPs or whether experienced LPs can replicate the value typically attributed to GPs. Our findings contribute to the debate on the distinctiveness of GP value-add by asking whether LPs can, under certain conditions, effectively play the role of their own GPs.

Beyond Fees: Co-Investment and the Design of Private Equity Relationships (2026, Working Job Market Paper)

I study why private equity funds offer co-investments, which give LPs discounted access and portfolio choice but impose costs on GPs. Using the Volcker Rule as a shock to LP bargaining power, I find that affected LPs became 159% more likely to co-invest. Simple theory and empirical tests show that bargaining power predicts co-investment, which in turn predicts reinvestment in future funds. LPs subject to higher liquidity risk also co-invest more, consistent with a risk-mitigation advantage to co-investment. Overall, co-investments complement alternative main-fund fee discounts in sharing surplus with important LPs and enhancing welfare for managers, LPs, and private firms.

Online Appendix