Club deals with a lender’s discipline: how families should co-invest in a vessel or a project

Families now invest in clubs

Investing together is now the norm for family offices. PwC found that club deals, in which a family office invests alongside others, made up 69% of family-office deal flow in the first half of 2025, up from 58% in the second half of 2015 (PwC, 2025). Knight Frank reported growing collaboration among family offices, noting that co-investment “allows for shared risk and access to larger opportunities” (Knight Frank, April 2026).

In North America, co-investments made up 8% of the average family office’s private-markets portfolio in 2025, a modest but growing share (RBC and Campden Wealth, 2025). For a single vessel or project, a club is often the only way in: the ticket is too large for one family, and too small or too specialised for a fund.

What the research says about sharing deals

The evidence on co-investment is mixed, and the difference matters. Fang, Ivashina and Lerner (2015) studied seven large institutions and found that co-investments offered by sponsors returned about 8 IRR points less than the sponsor’s own fund. They read this as adverse selection: sponsors share the deals they like least.

Braun, Jenkinson and Schemmerl (2020) studied 1,016 co-investments made between 1981 and 2010, and found “no evidence of adverse selection”. Gross returns on co-investments were similar to the funds’ other deals. Because co-investments carry lower fees, portfolios of about ten buyout co-investments outperformed the funds net of fees. A single co-investment, however, tended to underperform: deal returns are skewed, and only 35% of buyout deals beat their fund.

Clubs can also change prices. Officer, Ozbas and Sensoy (2010) found that public companies bought by clubs of private-equity firms received about 10% less of pre-bid equity value than those bought by a single sponsor. A club that bids together can pay less, which helps its members. A club that sells together, or that cannot agree, can leave value on the table.

How lenders solve the same problem

Bank lenders have run clubs for decades. In a loan syndicate, one lead arranger does the diligence and monitoring for many lenders. Sufi (2007) found that lead banks hold a larger share of the loan, and form more concentrated syndicates, when the borrower needs more monitoring. The lead’s own money is the guarantee that it will watch the borrower. Lenders to a single vessel or project add a defined security package, scheduled reporting and covenants that trigger action.

Family clubs often have none of these. The lead may hold a small stake, information arrives when the operator chooses, and decisions need everyone’s consent. The answer is to borrow the lenders’ discipline.

Three tests for a club

A family can test a club before joining it. Three tests follow. The first draws on the evidence above; the second and third are our own illustrations, labelled as such.

Test 1. Does the lead have enough at stake?

Sufi’s (2007) finding implies a simple condition. A lead will monitor the asset only if its own share of the value that monitoring protects exceeds the cost of monitoring. In our notation:

$$s_L\times \mathrm{\Delta }V\ge c_m$$

Here s_L is the lead’s share of the equity, ΔV is the value that monitoring protects, and c_m is the cost of monitoring. This is our own formulation of the incentive Sufi describes, not his model. If a lead holds 5% of a company in which monitoring protects US$10m, its stake in that protection is US$0.5m. If monitoring costs more than that, the lead has little reason to do it. A family should ask the lead to hold enough to pass this test.

Test 2. What do the fees cost?

Braun et al. (2020) show that lower fees are the main source of co-investors’ advantage. The effect is easy to estimate. For a fund that charges a management fee f and carried interest k above a hurdle h, the investor’s approximate annual net return is:

$$r_{\mathrm{net}}\approx (r-f)-k\times \max (r-f-h,0)$$

Here r is the gross return. This is our own simplification, which ignores timing. With a gross return of 12%, a 1.5% fee, 20% carry and an 8% hurdle, the fund investor nets about 10.0%. A co-investor who pays no fee and no carry keeps the full 12%. The two-point gap is the prize, but Braun et al. found that it is reliable only across a portfolio of deals.

Test 3. How likely is a deadlock?

When every partner must agree, one partner can block a decision. If each of the other n-1 partners would independently object to a given decision with probability q, the chance that it is blocked is:

$$P(\text{blocked})=1-{(1-q)}^{n-1}$$

This is our own illustration. With five partners and a one-in-ten chance that any one objects, a unanimous decision is blocked about 34% of the time. With ten partners it rises to about 61%. Majority rules for ordinary decisions, and unanimity only for a short list of reserved matters, keep a club able to act.

Framework: the club charter

A club needs a written charter before it buys anything. Five clauses, each borrowed from lenders’ practice, give a family club the discipline it usually lacks.

Clause 1. The lead’s commitment

The lead, whether a sponsor, an operator or one of the families, holds a meaningful share of the equity and keeps it until an agreed date. Its fees are disclosed, and it is paid for results, not for transactions.

Clause 2. Information rights

Every member receives the same information, on a fixed schedule: performance, cash flow, covenant tests and the condition of the asset. This mirrors the reporting that lenders require.

Clause 3. Decision rights

Ordinary decisions pass by majority. A short list of reserved matters, such as a sale, a refinancing, a new charter or offtake contract, or new capital, needs a higher threshold. Test 3 shows why unanimity should be rare.

Clause 4. Transfers and exit

Members can sell their shares under agreed rules: a right of first offer to other members, tag-along and drag-along rights, and a valuation method for transfers. The planned exit date is written down.

Clause 5. Deadlock and default

The charter says what happens when partners cannot agree, or when one cannot fund its share of new capital: escalation, an independent expert, a buy-sell mechanism, and dilution for a member who does not fund.

What’s the bottom line?

Clubs are now how most families invest directly, and for a single vessel or project they are often the only way in. The research does not settle whether co-investments are the deals sponsors want to share, but it shows that lower fees help, that one deal alone is risky, and that a lead with little at stake has little reason to watch the asset.

Lenders solved this problem long ago. A lead with real money at risk, information on a schedule, clear decision rules, agreed transfer rights and a deadlock procedure turn a group of families into a disciplined owner. These terms are easiest to agree before the asset is bought.

Summary

Club deals make up most family-office deal flow, and co-investment is a growing part of family portfolios. Research disagrees on whether co-investments are adversely selected. It agrees that lower fees are their main advantage and that single deals are risky. Clubs of buyers can pay lower prices, but clubs that cannot agree can lose value. Lenders manage syndicates through a lead with a large stake, scheduled information and agreed rules. Three tests check a club: the lead’s stake against the value of monitoring, the fees saved, and the risk of deadlock. A five-clause charter gives a family club a lender’s discipline.

This Insight is for general information only and does not constitute investment, legal or tax advice. Figures from public sources are as reported at the dates shown.