Direct Investments in Private Equity - a Nordic Perspective

Abstract

Based on an extensive survey among Nordic investors, we find that a majority of those investing in private equity are also pursuing direct investments. 17 in-depth interviews unveil that institutional investors are increasingly seeking to co-invest because of reduced fees and efficient capital allocation. However, institutional investors are not organized to fully take advantage of all the opportunities presented, as the internal team structure and processes are not yet at the maturity level desired by private equity firms. Solo investments are most commonly pursued by family offices, which utilize their long-term horizon and industrial expertise to create value through active ownership in a niche outside the scope of private equity firms. Discrepancies in views of extent and importance of co-investments have caused investors to adjust their investment strategies in anticipation of more co-investments, while private equity firms are reluctant to offer more opportunities than currently presented, causing a mismatch in supply and demand for co-investments.