By Christopher Henry (May 23, 2017, 3:19 PM EDT) -- Investors of many different stripes are eager to participate in private equity transactions as equity co-investors alongside private equity sponsors who source, lead and execute on investment opportunities. Direct co-investment opportunities are prized in investor communities because they offer the potential for superior economic return. Direct co-investments reside outside of the lead sponsor's fund. As a result, a co-investor's economic return is not reduced by the carried interest paid by the fund to the sponsor. The trade-off, if there is one, is that investments made outside the fund may result in greater concentration of risk than an investment made in the fund itself, as co-investors will typically invest in only some (and perhaps only one) of the investments made by the fund. Co-investors can mitigate this risk by attempting to build their own portfolio of co-investments, similar to the way a lead sponsor builds a portfolio within each fund....