Co investing definition for kids

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Late last summer, I hired him to help me clean up a large backyard flower bed. As we clipped thorny rose bushes, trimmed spent daisies and pulled stubborn weeds, we discussed everything under the sun — including money. He responded with another question: "What's an investment? I'm not sure I gave him a good explanation on the spot, but I realized afterward that Kyran's at an ideal age to start learning simple investment concepts.

He already grasps the basics of money and is earning some of his own. He also understands that if he wants to buy an item that costs more money than he has—like rollerblades—he has to save for it. So upon reflection, here's how I'd explain investing to someone Kyran's age. What's an Investment? An investment is something we put our money in to help it grow. If we just keep our money in a piggy bank or drawer, it won't earn any money for us.

Kinds of Investments There are many different kinds of investments: savings accounts, bonds and stocks, etc. Each of these helps our money grow and work for us in different ways: Savings Accounts: It's like lending our money to the bank. The bank pays us a bit of extra money at the end of each month—called interest—to borrow our money.

If we leave our money there and don't spend it, our money will stay safe, keep earning interest and grow. Then it will earn interest on the interest, which makes it grow even more. We call this compounding.

Bonds: When we buy bonds, we're lending our money to a bank, company or government, and they also pay us interest to borrow our money. Bonds can often pay higher interest than savings accounts, but you have to leave your money in them for a few years until they "grow up" or mature. Co-investing — a subset of direct investing, when an investor invests alongside a lead Sponsor to purchase ownership directly in an operating company.

On every deal, a leading party sources, structures, and executes the transaction. LP Co-investing LP co-investing is how co-investing is defined by most books and its based on the presumption that the investor already exists inside the context of a GP-LP relationship with a blind pool fund.

Since funds were the original means for investors to access private equity, LP co-investing was the original path for investors to access co-investment opportunities. Co-investment rights are often awarded to the LPs with the largest commitments as a way to build the relationship.

LPs value these co-investments, which typically offer reduced or eliminated fees, as a way to blend down their average rate of fees to the fund. In LP co-investing, the Sponsor on the deal is always the fund manager. However, in direct co-investing, the co-investor is moving independently of any GP-LP relationship with a fund. In fact, the co-investor need not have any preexisting relationship with the Sponsor leading a deal. In direct co-investing, the syndicate of investors is assembled and varies on a deal-by-deal basis.

Direct co-investing — when an investor invests alongside a Sponsor in a direct investment and the investment is not part of a greater GP-LP blind pool fund relationship with the Sponsor. In direct co-investing, the Sponsor may still be a fund, or it may be an independent sponsor, a family office, a strategic investor, or an individual with special expertise. The investor may take a passive or semi-passive role, or may be strategically involved.

While in LP co-investing, the co-investor is always a minority investor, in direct co-investing, a co-investor may actually bring the majority of the capital in a transaction. The anchor check may still be a passive co-investor and defer to the Sponsor to actively manage the asset.

In the end, each arrangement is a seat with direct access.