The Issues GP Should Consider in Relation to Co-investments and Parallel Investments by Itself
If the fund permits the GP, its associates or officers to co-invest or to make parallel investments alongside the fund, there is a potential of creation a conflict of interest for the GP.
Subject to the provisions of the fund documents, details of co-investment arrangements should be disclosed to the fund's LPs. To avoid potential prejudice to the interests of the fund, it is recommended that such documents allow co-investments or parallel investments by the GP (its affiliates or officers) only if the investments and divestments are made pro rata with the fund, in the same securities, at the same time and on the same investment terms. If this recommendation is not followed, it is particularly important that the operation of the co-investment arrangements be subject to the conflict of interest procedures of GP and the fund and should be disclosed and documented to the LPs.