One question arises in almost every conversation I have with prospective investors. Whether I am meeting entrepreneurs who have recently sold a business, family offices exploring private markets or institutional investors reviewing their allocation strategies, someone inevitably asks: "Why should I invest through a fund instead of investing directly or participating in co-investments?"

It is a fair question. Private markets have never been more accessible, and direct investment opportunities are more visible than ever before. At first glance, investing directly appears to offer obvious advantages: greater control over investment decisions, lower fees and the ability to select exactly where capital is deployed. Co-investments have further strengthened this perception by allowing investors to participate alongside established fund managers while often benefiting from reduced fee structures. It is therefore understandable why some investors question whether investment funds remain the most appropriate vehicle.

In my experience, however, the question itself is based on a misconception. Successful investing is rarely determined by the investment structure alone. Instead, it depends on whether an investor has the expertise, governance, resources and discipline required to execute a successful investment strategy over many years. The real comparison is therefore not between funds and direct investments, but between institutional investment capability and individual investment capability.

This distinction is particularly relevant in private markets. Unlike listed securities, private investments require considerably more than identifying an attractive opportunity. Transactions must be sourced, evaluated, valued, negotiated, structured and monitored throughout their lifecycle before an eventual exit is achieved. Each stage demands specialist knowledge, experienced professionals and disciplined decision-making. A professionally managed fund brings these capabilities together within a single institutional framework, allowing investors to benefit not only from the underlying investments but also from the investment process itself.

That process is often underestimated. Investors naturally focus on the assets within a fund, yet much of the value lies behind the scenes. Investment committees challenge assumptions before capital is committed. Risk managers assess downside scenarios. Legal and tax advisers review transaction structures. Portfolio managers monitor performance, while governance frameworks ensure decisions remain consistent with the fund's strategy and investors' interests. This institutional infrastructure has been developed over years of experience and is extremely difficult for individual investors to replicate independently.

This does not mean direct investing is the wrong approach. For investors with dedicated investment teams, established governance structures and significant resources, direct investments can provide meaningful advantages. Greater control, enhanced flexibility and lower fee structures can improve long-term outcomes where opportunities are sourced effectively and managed with discipline. It is therefore unsurprising that many large pension funds, sovereign wealth funds and sophisticated family offices have increased their direct investment programmes in recent years.

However, direct investing also transfers every responsibility from the fund manager to the investor. The investor becomes responsible for sourcing opportunities, conducting due diligence, negotiating commercial terms, managing risks, overseeing portfolio companies and planning successful exits. Greater control is valuable only when accompanied by the capability to exercise that control effectively. Without the appropriate expertise and infrastructure, what appears to be cost saving may ultimately become a far more expensive decision.

Co-investments occupy an important position between these two approaches. They allow investors to increase their exposure to specific opportunities while benefiting from the sourcing, due diligence and execution capabilities of an experienced investment manager. For this reason, co-investments have become an increasingly important component of institutional portfolios. Nevertheless, they are most effective when they complement an existing fund allocation rather than replace it. A diversified fund portfolio provides stability and broad market exposure, while selective co-investments allow investors to express stronger conviction in individual transactions without sacrificing diversification.

This explains why the world's largest institutional investors rarely view funds, direct investments and co-investments as competing alternatives. Instead, they use each other strategically. Funds provide diversification, governance and institutional expertise. Direct investments offer control where internal capabilities justify it. Co-investments bridge the two by increasing exposure to carefully selected opportunities. The objective is not to choose one structure over another, but to combine them in a way that aligns with investment objectives, available resources and long-term strategy.

Perhaps the better question is not, "Why should I invest through a fund?" rather, it is, "Do I possess the expertise, governance and infrastructure necessary to achieve better outcomes without one?" For many investors, professionally managed funds continue to provide the strongest foundation for long-term wealth creation. As investor capabilities evolve, direct investments and co-investments can become valuable complements. Ultimately, the most sophisticated investors do not define themselves by the structures they use. They define themselves by their ability to select the right structure for the right purpose at the right time.