– Secondary fund breaks $500 million

As levels of primary private equity fund raising increase, so does the size of the potential market for secondary investments. Among the beneficiaries of this trend is London-based secondary adviser Coller Capital, which in January closed Coller International Partners III (CIP III) on $501 million (euros 493 million). The fund, which is more than double the size of its 1998-vintage $240 million predecessor, was substantially oversubscribed in comparison with its launch target of $400 million. For the time being, CIP III ranks as the largest secondaries fund based in Europe, although it is likely soon to be equalled, if not surpassed, by Pantheon Ventures’ global secondaries offering, launched last year with a target of $500 million.

That a number of return investors substantially re-upped their commitments to CIP III is testament to Coller Capital’s historic performance as well as the rapid expansion of the worldwide secondaries market. CIP II, which closed in June 1998 and reached full investment last February – thanks in a large part to the Shell Pension Fund private equity portfolio deal – has already returned 73 per cent of committed capital to investors.

Among the returning investors signing up for CIP III alongside sponsor ING Barings were CalPERS, which contributed $100 million, an uplift of $25 million from its CIP II commitment, and State of Michigan, which committed $60 million, compared with contributions of $5 million and $38 million respectively to the first and second Coller funds. New participants include Abbey National Treasury Services, the Cable & Wireless Pension Fund and General Motors Investment Management.

CEO Jeremy Coller reports that around 60 per cent of CIP III was drawn from US sources, with a further 25 per cent provided by Europe-based investors. The fund also attracted investors from the Middle East and elsewhere. Commitments from state and corporate pension funds comprise 70 per cent of the fund by value, followed by insurance company monies at 12 per cent and bank funds at 10 per cent, while family investors account for the balance.

A number of CIP III’s LPs may co-invest alongside the new fund, which, as a result, “will have the firepower to buy secondaries of any size globally”, according to Jeremy Coller.

CIP III is targeting interests in private equity funds focusing on investments in Europe and the US held by European and Asian investors. The new fund, which held a first close last summer, has already committed more than $100 million, acquiring positions in a number of UK and US funds from unnamed vendors. CIP III is structured as a ten-year Cayman Islands-domiciled LP.

Coller Capital, which currently advises funds totalling $850 million, has expanded its management team significantly during the past year or so. The most recent hire was Daniel Dupont, who joined from the Caisse des depots du Quebec, taking the investment team to 16.