Texas family offices face a structural decision on every private-markets allocation: commit to a fund as an LP, or wait for the deal-by-deal co-investment the GP offers alongside. The structures look similar from the outside — both produce equity exposure to private deals — but the fee math, control rights, and DPI profile diverge sharply.
The fund commitment path is the default. It pays a 2% management fee on committed capital, 20% carry on profits above an 8% hurdle, and lasts 10+ years. The co-invest path carries no management fee, lower carry (typically 5–10% with no hurdle), and returns capital deal-by-deal over a 3–5 year window. For a Texas family office deciding between the two, the math — not the marketing — drives the answer.
The Fee-and-Carry Math That Actually Matters
Run a representative comparison: a $5M allocation split between a $2.5M LP commitment and $2.5M of co-invest into the same GP's deals over a 4-year holding period.
| Line Item | LP Commitment ($2.5M) | Co-Invest ($2.5M) |
|---|---|---|
| Management fee | $100K/year × 4 yrs = $400K | $0 |
| Carry | 20% on profits above 8% IRR | 5–10% on all profits |
| Holding period | Fund-life (10+ years typical) | Deal-by-deal (3–5 years per deal) |
| Capital call timing | Up to fund commitment, GP-controlled | Per deal, allocator can opt out |
| Control rights | Limited LPAC, no deal veto | Opt-in per deal, full transparency |
| Year 3 DPI (Texas deals) | ~0.7× on called capital | ~1.4× on deployed capital |
The DPI gap is the number that matters most to Texas family offices evaluating the structures. LP commitments in Texas-focused funds are sitting near 0.7× DPI at year three — that's the J-curve doing its work, but the gap is meaningful. Co-invest into the same deals is printing closer to 1.4× DPI at the same point. The carry delta compensates partially, but only if the LP fund's later-vintage exits outperform — which historically happens less often than fund marketing materials suggest.
Co-invest isn't "free carry." It's a different risk-return profile. You give up fund-level diversification and GP discretion. You take back fee efficiency, deal-level transparency, and faster DPI. The question is which trade-off your Texas family office mandate actually values.
When LP Commitments Win
The fund commitment path is the right answer when:
- Deal flow access matters more than fee efficiency. If your Texas family office doesn't have the team to underwrite co-investments deal-by-deal, the fund commitment gives you access you can't get otherwise. The management fee is paying for sourcing infrastructure.
- You want fund-level diversification. A 10-deal fund spreads risk across vintages, sectors, and operators. Co-invest into one deal at a time concentrates risk in ways that require more operational oversight than most allocators can sustain.
- The GP has a differentiated, defensible edge. Some funds genuinely have access to deal flow that family offices cannot replicate. For those GPs, paying 2-and-20 is rational — the access is worth the fee.
- You're building a long-duration relationship. Repeat fund commitments build the relationship capital that produces preferential co-invest allocations later. Skipping the fund commitment forfeits that.
When Co-Invest Wins
The co-invest path is the right answer when:
- Fee drag is eating your net IRR. A 2% management fee on called capital plus 20% carry leaves little upside on smaller fund sizes. For Texas family offices allocating under $10M, co-invest fee economics are materially better.
- You want deal-level transparency and control. Co-invest agreements typically include deal-level reporting, consent rights on material decisions, and the ability to opt out of specific deals. LPs get none of that.
- DPI matters more than IRR. Co-invest returns capital faster. For family offices with near-term distributions to underlying beneficiaries, the faster DPI profile is structurally valuable.
- The deal-by-deal underwriting fits your team. If your Texas family office has the operational bandwidth to evaluate one deal at a time — sector thesis, deal terms, operator quality — co-invest is the more efficient capital deployment.
How the Sub-$10M Model Skews Co-Invest Availability
Dominion's sub-$10M acquisition model produces a deal flow pattern that's structurally favorable to co-invest. Smaller deals don't fit the LP commitment model as cleanly — fund managers can't deploy meaningful LP capital into $3M equity checks. So the GP either syndicates the equity to a co-invest pool or passes on the deal. For Texas family offices on the co-invest side, that creates a steady stream of available opportunities that LP commitments simply don't capture.
The structural edge isn't just fee efficiency. It's deal selection — co-invest gives allocators the ability to opt into the deals that match their thesis and opt out of the ones that don't. Over a 5-year deployment horizon, that selectivity compounds into meaningfully better risk-adjusted returns than a blind-pool LP commitment.
Texas family offices that treat the co-invest vs. LP commitment as a binary choice leave value on the table. The right structure is usually a mix — a smaller LP commitment to maintain relationship access, paired with co-invest allocations into the deals that match the family's specific thesis. The exact mix depends on team bandwidth, DPI needs, and how much fee drag the underlying beneficiaries can absorb.