Committing to a fund is the primary way to access private markets, but it is not the only one. Co-investment lets an LP invest directly alongside a GP in a specific deal, usually with reduced or no fees. Secondaries let an LP buy or sell existing fund stakes rather than committing to a new one. Together they give a sophisticated allocator levers over cost, timing and exposure that a primary commitment alone does not.
Both have moved from the margins to the mainstream of institutional investing, because both address real limitations of the plain fund commitment: the drag of fees, the slowness of the J-curve, and the illiquidity of a decade-long lockup.
Co-investment: cheaper, more concentrated exposure
When a GP finds a deal too large for its fund alone, it offers the extra to willing LPs as a co-investment. The LP invests directly in that single company, typically paying little or no fee and no carry, which sharply improves the net return on that dollar compared with fund exposure. GPs favour LPs who can move fast and decide credibly, so co-invest access is itself a reward for being a good partner.
The trade-off is concentration and speed. A co-investment is one deal, not a diversified fund, so a single bad outcome hits harder, and the LP must underwrite it quickly with limited information. The fee saving is real, but so is the need for the in-house capacity to judge a deal on a tight clock.
Secondaries: buying and selling fund stakes
The secondary market lets an LP sell an existing fund commitment to another buyer, or buy one, rather than committing to a brand new fund. A seller gains liquidity in an otherwise illiquid asset, often to rebalance or exit early. A buyer acquires a more mature position, later on the J-curve, with a shorter remaining life and visibility into the underlying assets.
For buyers, secondaries mute the J-curve and shorten the wait, because the fund is already partly through its life. For sellers, they turn a ten-year lockup into an exit ramp, at a price. GP-led secondaries, where a GP moves assets into a new vehicle to give existing LPs a choice to cash out or roll over, have become a large and sometimes controversial part of this market.
How they fit a program
A mature private-markets program rarely relies on primary commitments alone. Co-investment lowers the blended fee load and lets an allocator lean into its highest-conviction deals. Secondaries manage liquidity and pacing, letting a program buy mature exposure, sell what it no longer wants, and smooth the J-curve. Used together, they turn a static commitment into a portfolio the allocator can actively shape.
The catch is that both demand capability. Co-investment needs deal-underwriting skill, secondaries need pricing and diligence on complex, seasoned positions. They reward the institutions that have built the team to use them, and they punish those that reach for the fee savings without the judgement to back it up.