Co-Investment vs Private Equity Secondaries: Key Differences

The main difference is timing. A co-investment joins a deal as it happens. A secondary buys into deals done years earlier. For the whole market, see private equity secondaries. The table compares the two on definition, who uses each, legal and tax treatment, risk, liquidity and a typical example.

In one line: co-investment picks the deal, and secondaries buy the history.

The Co-Investment

1. 1.0
   The fund finds a dealA private equity fund agrees to buy a company and needs more equity than it wants to put in alone.
2. 2.0
   It invites co-investorsThe manager, or general partner, offers the extra slice to selected investors.
3. 3.0
   A vehicle holds the stakeCo-investors usually join through an SPV, a company formed for that one deal. Fees and profit share are set in its documents.
4. 4.0
   Exit with the fundWhen the fund sells the company, the co-investors usually sell too.

The Secondary

1. 1.0
   An investor wants outA limited partner, an investor in the fund, wants cash before the fund ends. This is an LP-led sale.
2. 2.0
   A buyer prices the stakeThe buyer looks at what the fund holds and offers a share of its net asset value (NAV), the fund’s own estimate of its holdings.
3. 3.0
   The manager consentsThe fund agreement usually requires the manager’s approval to transfer the stake.
4. 4.0
   The buyer steps inThe buyer receives future distributions and owes any unfunded commitment the seller had not yet paid.

Take an illustrative stake: a $10M commitment, $8M paid in, a NAV of $9M and $2M still to be called. At the H1 2026 average price of 87% of NAV, the buyer pays $7.83M. The buyer also takes on the $2M the fund can still call. Managers also run GP-led deals, moving assets into a new vehicle such as a continuation fund. Those made up 53% of volume in H1 2026.

For an investor, it depends on what you can judge. A co-investment asks you to assess one company and one sponsor, often within a short deadline. A secondary asks you to assess a portfolio and its price against NAV. Co-investment concentrates risk. Secondaries spread it but depend on valuations set by the seller’s manager.

Access is narrow for both. Many private funds take only qualified purchasers, individuals with at least $5M in investments, or limit themselves to 100 owners (15 U.S.C. 80a-3). See qualified investor and accredited investor for the tests.

For an employee of a private company, neither is a way to sell your own shares. That is a secondary transaction or a company tender offer. Fund secondaries and co-investments change who owns your company indirectly. They do not change your shares or options.

Both usually come as interests in a partnership or an LLC taxed as one. The vehicle pays no income tax itself (26 U.S.C. 701). You report your share of its income and gains from a Schedule K-1.

A secondary adds two rules. First, the buyer of a fund stake may get a step-up in the tax basis of its share of the fund’s assets. That happens only if the fund has a Section 754 election in place or a large built-in loss (26 U.S.C. 743). Second, if a foreign investor sells a US fund stake, the buyer may have to withhold 10% of the price. If the buyer fails to, the fund withholds from the buyer’s later distributions (26 U.S.C. 1446(f)).

• Co-investmentK-1 from the deal vehicle. Gain or loss when the company is sold.
• Secondary, buyer sideK-1 from the fund. Possible basis adjustment. Check withholding if the seller is foreign.
• Secondary, seller sideGain or loss on the sale of the fund stake, measured against your basis.

Co-Investment

For

You choose the company. Fees are set for the single deal. Your money goes to work at once, with no wait for capital calls.

Against

All of it rides on one company. Decisions come on short deadlines. Access depends on a relationship with the fund manager.

Verdict: co-investment suits an investor who already backs a fund, can review deals quickly and accepts single-company risk.

Private Equity Secondaries

For

You can see what the fund holds before buying. Prices often sit below NAV. Cash may come back sooner because the fund is further along.

Against

NAV may be out of date. You inherit unfunded commitments. Transfers need the manager’s consent and can take months.

Verdict: secondaries suit an investor who wants spread-out exposure to assets already bought and can judge a price against NAV.

A single-deal vehicle is the common thread. Co-investors use one, and so do many investors in pre-IPO companies. Axevil, for example, sets up a separate Delaware SPV for each deal, managed by Axevil Capital, LLC. When a fund manager moves companies into a new vehicle, the deal sits between the two models. See continuation fund vs secondaries.

Common Mistakes

• Treating a discount as a gainA price of 87% of NAV is a discount only if the NAV is right.
• Forgetting the unfunded partA fund stake can come with money the fund can still call from you.
• Underrating concentrationA co-investment is one company. One failure can wipe out the stake.
• Skipping the withholding checkIf the seller is foreign, the buyer may owe 10% withholding on the price.

Co-investment

A direct stake in one company, bought next to the private equity fund that leads the deal.

Secondaries

Purchases of existing stakes in private funds, or of assets a manager moves into a new vehicle.

LP-led sale

A fund investor selling its stake to a new buyer.

GP-led deal

A fund manager moving assets into a new vehicle and letting investors sell or roll over.

Net asset value (NAV)

A fund’s own estimate of what its holdings are worth.

Unfunded commitment

Money an investor promised a fund that has not yet been called.

SPV

A special purpose vehicle, a company formed to hold one investment.

Qualified purchaser

An individual with at least $5M in investments, or an entity meeting larger tests.

Section 754 election

A fund’s choice that lets a buyer of a stake adjust the tax basis of its share of the fund’s assets.

Schedule K-1

The form a partnership sends each investor with its share of income, gains and losses.

Rules and filings were last checked on November 6, 2026. Market figures are for the first half of 2026 and come from Jefferies’ own data. Rules are US federal law. The worked example is illustrative.