Club deals are gaining momentum in an era when investors are putting a high priority on control and risk management. Because these types of co-investments are open to just a handful of investors at a time, many believe they offer a structural “happy medium” — one that offers the control of a separate account but provides the type of diversity available for smaller investors in a commingled fund. But, like any investment vehicle, the club deal doesn’t come with a guarantee that nothing will go wrong.

There’s a joke about club deals that people in the industry like to tell. It goes like this: “They say there are two kinds of club investors: Those who think that clubs are the investment community’s saving grace, the end-all and be-all fund structure, and those who have done them.” The joke usually elicits some laughter from investors and managers alike because it hits an interesting point: Club deals tend to spark strong opinions on both sides of the table.