Firm: Coller Capital
Fund: Coller International Partners V
Target: $3.75 billion
Amount raised: $1.437 billion (preliminary closes)
Placement agent: Credit Suisse (Europe) Ltd.
London-based secondary private equity firm Coller Capital continues to take in cash for its next dedicated secondary fund, which will be the largest such fund ever if it meets its listed target of $3.75 billion. At the same time, the firm is pursuing a more aggressive strategy in Asia.
In a market crowded with rival fund-raisers, Coller has held an interim close on Coller International Partners V, bringing it slightly closer to its 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, HFI Private Equity, Singapore-based Hippogriff Investment Partners>Hippogriff Investment Partners, the City of Miami Fire Fighters’ and Police Officers’ Retirement Trust, the State of Michigan Department of Treasury, Dublin-based Nortrust, Nova Private Equity Partners, Abu Dhabi-based Procific, the State General Fund of the Sultan of Oman, Swiss insurance company SUVA, the U.K.-based Tyne and Wear Pension Fund and Willamette University.
Coller seeks to beat the dedicated secondary fund raising record set earlier this year by Lexington Partners when it closed Lexington Capital Partners VI at $3.5 billion. Executives at Coller declined to discuss the fund, citing commonly-accepted interpretations of SEC regulations regarding private placements.
Look for Coller’s latest fund to see more investment in Asia than prior partnerships. 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 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, investing $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. “Investors have been attracted conceptually to Asian private equity market for last three to four years, but people have been timid to take action,” says Mizuno. He points out that early-movers in the latest Asian private equity boom–firms that began investing in the late 90s and early 2000s–have now generated good 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 across the globe rated Asia-Pacific buyout opportunities as “very attractive.”
Mizuno says that the secondary market in Asia still lags behind the development of secondary markets in the United States and Europe. A big reason: Secondary deals in Asia can be more difficult due to the more diverse universe of private equity limited partners there. While there is a classic community of large institutional investors in the United States and Europe, Asian private equity funds are more likely to have large numbers of individual investors and family offices as their LPs, which makes for a very large and diverse pool of LPs that have different goals and practices thatn traditional North American and European instutiions. Also, 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 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 raising money right now 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 (€1 billion) this year for its latest secondary fund, Partners Group Secondary 2006 Fund. The fund held a first close on $363 million (€300 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 approximately $102 million, according to SEC 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 approximately $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.— M.S.