Coller Capital continues to raise cash for its next dedicated secondary fund, which will be the largest secondary fund ever if it meets its target of $3.75 billion. At the same time, the London-based firm is pursuing a more aggressive strategy in Asia.
Thanks to a rush of primary fund-raising, the firm has seen its deal flow involving Asian assets or Asian sellers more than double over the last year, according to Partner Hiro Mizuno. Earlier this year, for example, the firm acquired a stake in a fund managed by Bangalore, India-based ICICI Venture, as it invested $35 million for an interest in the India Advantage Fund. It was the first secondary deal involving a venture fund publicized in India, according to the firm. Coller has also recently completed a secondary deal in Hong Kong.
Mizuno says that the time is ripe for investing in Asia on all private equity fronts, and that the secondary market will ultimately benefit. He points out that early movers in the latest Asian private equity boom, firms that began investing in the late ’90s and early 2000s-are generating decent returns, particularly from restructuring deals in Japan and Korea. “People have seen real cash coming out of these deals and that gave courage to other investors,” Mizuno said.
Coller is eager to push the trend along, any way it can. Earlier this year, the firm published a survey that pointed to Asia-Pacific buyouts as among the most attractive opportunities for private equity funds. In 2005, Asia-focused private equity funds raised three times what they did in 2004, bringing in $19.2 billion, according to the survey. In the first half of this year, Asian private equity funds raised another $8.8 billion. The firm’s Private Equity Barometer survey also found that between 40% and 50% of private equity investors worldwide rated Asia-Pacific buyout opportunities as “very attractive.”
Asian investors typically only take advantage of the secondary market to exit the asset class entirely; few are using the secondary market as a tool for portfolio management as investors are apt to do in the West. However, Mizuno says that the concept of using the secondary market for portfolio management is gaining traction in Asia, particularly in Korea and Japan.
Whether or not they share Coller’s enthusiasm for Asia, rival secondary buyers continue to raise money hand over fist. Those marketing new funds currently include Pantheon Ventures, which is seeking as much as $2 billion for Pantheon Global Secondaries Fund III. Switzerland’s Partners Group may raise up to $1.2 billion this year for its latest secondary fund, Partners Group Secondary 2006 Fund. The fund held a first close on $363 million thanks to strong interest from prior investors. New York-based Auda is believed to be in the market raising its second dedicated secondaries fund. Meantime, New York-based AIG is raising a $500 million private equity fund that has a secondary investment component. AIG PEP IV Secondary has raised about $102 million, according to Securities and Exchange Commission documents. AIG PEP IV also has primary fund components that include buyouts, venture, co-investment and non-U.S. funds.
The Camelot Group, a New York-based private equity advisory firm, estimates that the amount of dedicated secondary capital raised over the past three to four years totals about $34 billion. As in the primary market, the rise in fund-raising has pushed prices for assets higher. It’s a development highly friendly to sellers, but one that Coller needs to keep a careful eye on as it tries to wrap up a record-breaking effort.
For its current fund, Coller recently held an interim close on Coller International Partners V, bringing it slightly closer to its $3.75 billion goal. Its predecessor, the $2.6 billion Coller International Partners IV, is more than 90% invested. Fund V investors likely to be getting a chance to re-up include Barclays Pension Funds, the California Public Employees’ Retirement System, CPP Investment Board, the State of Michigan Department of Treasury, Abu Dhabi-based Procific, the State General Fund of the Sultan of Oman and Wear Pension Fund, among others. —Matthew Sheahan