Nash Equilibrium in Co-Investment Opportunities

How LPs and GPs Can Strategize for Optimal Outcomes

Private market investing often resembles a high-stakes game where Limited Partners and General Partners must carefully navigate cooperation, competition, and information asymmetry. One powerful lens to analyze these dynamics is game theory, particularly the concept of Nash Equilibrium—a situation where no player can benefit by unilaterally changing their strategy, assuming others stay the course.

In co-investments, where LPs invest alongside GPs in deals (often with reduced fees or enhanced economics), understanding Nash Equilibrium can help both sides maximize value while minimizing conflict. Let’s break it down.