After the Lehman collapse in 2008, the investment world changed significantly. Limited partners pulled back on their allocations to private equity, making it difficult for many private equity firms to raise new funds. The limited partners that eventually came back to the asset class did so demanding more transparency from portfolio managers, more control over the investments their private equity fund managers were making and a break on fund fees. To achieve these goals, several LPs launched co-investment vehicles to invest directly alongside their private equity portfolio managers.

As a result of this shift, an increasing number of limited partners are investing more capital directly into individual deals. According to a recent report from Preqin, “Preqin Special Report: LP Appetite for Private Equity Co-Investment,” 43 percent of limited partners are actively seeking co-investment opportunities. London Pensions Fund Authority, for example, completed its first co-investment in December 2013, while Canadian-based

CDP Capital now dedicates 50 percent of its $14.1 billion ($15.7 billion Canadian) private equity allocation to direct and co-investments. Many are touting this change as a new frontier in private equity, but some private equity shops had the idea of giving LPs more choice years earlier. In fact, global private equity firm Investcorp has been operating this way since its founding in 1982.

Nemir Kirdar, the firm’s CEO and Executive Chairman, founded Investcorp with the vision of investing in Western-based companies on behalf of wealthy individuals and families and institutions located in the Arabian Gulf. He started his business by completing deals on a deal-by-deal basis. When raising captive funds was very popular in the industry, many questioned the sustainability of Investcorp’s funding model. But fast forward to today and Investcorp has thrived without ever moving away from its deal-by-deal model. The firm has grown substantially, with a more-than-30-year history of transatlantic private equity investing in both Europe and North America. In the mid-1990s, the firm expanded to include real estate and hedge fund investing. More recently, Investcorp expanded its private equity practice to include investing in the Arabian Gulf and the broader MENA region rounding out its global presence.

Since inception, Investcorp has raised more than $11 billion for corporate investment  and completed approximately 150 deals with an enterprise value of $35 billion. In the past two years, the firm has returned more than $3 billion to investors. Investcorp has defined its areas of investment, focusing on deals in consumer and retail, business services and industrials, investing up to $200 million of equity per deal.

“We are thoughtful about how we approach the market. The firm identified wealth in the Gulf and built a sustainable business model that is in demand today,” says Gary Appel, vice chairman of corporate investment for Investcorp’s North America office. Appel joined Investcorp in 2013 after more than 25 years of private equity investing.

Appel says Investcorp’s investors like the deal-by-deal model for many reasons. First, it gives investors choice in deal selection. Second, the deal-by-deal model makes every deal count. The firm has to pay investors returns by deal, not by portfolio. Where many private equity firms can have a failure in their portfolio, but still generate decent returns, Investcorp must produce on every deal to fulfill its commitment to its investors. “A limited partner may be invested in one company and not in others with us, so we can’t rely on a portfolio to bring returns. If one deal goes bad, it directly impacts our investors in that deal and there are consequences,” says Appel. Lastly, with no investment mandate, Investcorp has the flexibility to take majority or minority positions, although the firm typically makes controlling investments.

Still, given today’s increasingly competitive environment for investment dollars, Investcorp works to stay close to its clients. “We have a relationship manager who actively talks to our investor base. They get the best of both worlds with us. They can put money into a deal that interests them, but there’s no penalty if they don’t make a capital commitment,” says Appel. “It gives our clients the ability to be very flexible.”

While most pension funds want to have more say and are looking to invest directly, that model can be difficult for institutional investors that often don’t have the bandwidth to evaluate single deal opportunities or the expertise to work with a company post acquisition. “It’s hard for LPs to go direct, but their desire for more control is understandable, which is one of the reasons the Investcorp deal-by-deal model is so compelling,” says Appel.