Coller Capital Secures $6.8 Billion for Private Credit Secondaries Fund

Coller Capital, A New York-Based Secondaries-Focused Private Equity Firm, Has Raised $6.8 Billion In its Latest Funding round For Its Private Credit Secondaries Platform.

The Capital Raised For The Firm’s Coller Credit Opportunities II (CCO II) Fund will Be Allocated Across Lp-led And Gp-Led Secondary Transactions, The Firm Said.

During Its First Round Of Funding In 2022, The Firm Raised $1.4 Billion For its Coller Credit Opportunities I (CCO I) Fund.

Coller Capital Says It Sees An Increase In Opportunities Within The Private Credit Secondaries Market, As Demand Continues too Grow From Investors For “Liquidity Solutions, Diversification, And Elegant Portfolio Management Tools.”

Since Last January, Coller Capital Has Documented An Increase Of $53 Billion In Secondary Credit Investment Opportunities, While Stating That More growth Is Expected To come As Private Credit Funds mature.

“Investors Increasingly Recognize The Strategic Importance Of Private Credit Secondaries In Achieving Defensive Exposure, Liquidity, And Enhanced Portfolio Management Amid Heightened market Volatility,” jeremy Coller, CIO And Managing Partner Of coller Capital, Said.

Coller Capital Declined To Comment To Connect Money On The Specific Amount Of The Capital That Was Raised For The Coller Credit Opportunities II (CCO II) Fund.

Coller Capital Started Investing In Credit Secondaries In 2008, And The Firm Now Has Recorded $10.1 Billion In Assets.

Since The Firm’s Inception, It Has Collectively Managed About $40 Billion Across Private Equity, Private Credit, And Other Private Market Assets.

Last August, Coller Capital Closed A Gp-Led Transaction For A $1.6 Billion Credit Continuation Vehicle With abry Partners,A Private Equity And Credit Firm.

The Abry Advanced Securities Fund III Allows Investors To Seed Abry Partners’ new Private Credit Strategy.

What are the primary benefits of investing in private credit secondaries compared to primary private credit investments?

Fund Overview: A Deep Dive into Coller Capital’s Latest Raise

Coller Capital, a leading global investor in private equity secondaries, has successfully closed its latest fund wiht $6.8 billion in commitments. This ample raise, focused on private credit secondaries, signifies growing investor appetite for this increasingly prominent asset class. The fund, Coller Credit Secondaries VII, exceeded its initial target of $6 billion, demonstrating the firm’s strong track record and the compelling opportunities within the secondary market.This achievement positions Coller Capital as a key player in facilitating liquidity for investors in private credit.

What are Private Credit Secondaries?

Private credit secondaries involve the purchase of existing private debt investments from investors looking to exit their positions before maturity. This differs from primary private credit, where investors directly originate loans. Key characteristics include:

Liquidity Solution: Provides a pathway for limited partners (LPs) in private credit funds to sell their commitments.

Discounted Valuations: Secondary market transactions typically occur at a discount to net asset value (NAV), offering potential for attractive returns.

Diversification: Allows investors to gain exposure to a diversified portfolio of private credit assets without the commitment of a primary fund investment.

Reduced J-Curve effect: The “J-curve” is a common phenomenon in private equity and credit where early returns are negative due to fees and initial investment costs. Secondaries can mitigate this by offering immediate cash flow.

Key Investors and Fund Strategy

The $6.8 billion commitment comes from a diverse group of institutional investors globally, including pension funds, sovereign wealth funds, insurance companies, and family offices. These investors are increasingly allocating capital to option investments, with private credit secondaries gaining traction due to their risk-adjusted return potential.

Coller Capital’s strategy focuses on:

Direct Secondary Purchases: Acquiring portfolios of private credit investments directly from LPs.

GP-Lead Restructurings: Participating in transactions where the general partner (GP) of a private credit fund initiates a secondary process.

Focus on Senior Secured Debt: Prioritizing investments in senior secured loans, offering greater downside protection.

Geographic Diversification: Targeting opportunities across North America, Europe, and Asia-Pacific.

The Growing Appeal of Private Credit as an Asset Class

The rise of private lending and the subsequent growth of the secondary private credit market are driven by several factors:

Bank Retrenchment: Traditional banks have reduced their lending activities, creating a gap filled by private credit funds.

Demand for Yield: Low interest rates in recent years have driven investors to seek higher-yielding assets like private credit.

Attractive Risk-Adjusted Returns: Private credit has historically delivered competitive returns compared to public debt markets.

Increased Fund Formation: The proliferation of private credit funds has created a larger secondary market for existing positions.

Benefits of Investing in Private Credit Secondaries

Investing in private credit secondary funds offers several advantages:

Shorter Time Horizon: Compared to primary funds,secondaries typically have a shorter investment period and faster distributions.

Immediate Diversification: Access to a portfolio of underlying loans across various industries and borrowers.

Potential for Higher Returns: Discounted valuations can provide opportunities for outperformance.

Enhanced Liquidity: Provides a liquidity option for existing private credit investors.

Coller Capital’s Track Record and Expertise

Coller Capital has been a pioneer in the private equity secondary market for over three decades. The firm’s expertise in due diligence, valuation, and portfolio management is a key differentiator. They have completed over 180 secondary transactions, deploying over $14 billion of capital. This extensive experience positions them well to navigate the complexities of the private credit secondary market.

Market Trends and Future Outlook

The private credit secondary market is expected to continue its growth trajectory. Several trends are shaping the landscape:

Increased Transaction Volume: Driven by growing investor demand and the maturing of private credit funds.

Greater Institutionalization: More institutional investors are entering the market, increasing liquidity and sophistication.

Focus on ESG Factors: Environmental, Social, and Governance (ESG) considerations are becoming increasingly critically important in investment decisions.

Technological Advancements: Data analytics and technology platforms are improving the efficiency of secondary market transactions.

the accomplished closing of Coller Capital’s $6.8 billion fund underscores the increasing importance of private credit secondaries as a valuable component of a diversified investment portfolio. As the market continues to evolve, investors will likely seek experienced managers like Coller Capital to navigate the opportunities and challenges within this dynamic asset class.