Coller raises cap to $4.5bn

Investors have informally approved the increase which should mean Coller Capital closes the largest secondaries fund early next year, eclipsing rival Lexington Partners.

Coller Capital, one of the largest private equity secondaries managers, is raising the cap on its latest fund Coller International Partners V from $3.75 billion (€2.9 billion) to $4.5 billion to accommodate demand.

Secondaries managers buy portfolios of companies or stakes in funds from investors in private equity funds.

Jeremy Coller: largest secondaries fund

One investor in Coller’s previous funds said: “Coller was due to close in September then it went quiet and came back with this increase. In the current environment it is no surprise.”

A source familiar with the fundraising said Coller had anticipated the need to increase the fund as early as August, but paperwork had meant the firm could not be certain how much additional capacity it would need till now.

The firm is seeking formal approval for the increase, which in most funds’ terms and conditions needs the agreement of 50 percent of investors, he said.

Another source familiar with the fundraising confirmed investor interest in Coller’s fund meant the firm could have raised as much as $6 billion. Even with the increased capacity it will still have to scale back some investors’ allocations and exclude others.

For some the increase in management fees generated by the larger fund may be an issue. The more money a firm makes in fees the less aligned it is with its investors who are depending on capital gain to generate returns, one investor said.

However, the investor in Coller said: “The economics of the fund were already fairly good. The fees will get bigger on an absolute basis. But in a market where some secondaries deals are being done at a premium to net asset value Coller tends to be a lot more creative in his thinking.”

In the most recent review of its private equity portfolio the $210bn California Public Employees’ Retirement System said 1998 Coller International Partners II had generated a net internal rate of return of 23.4 percent and 1999’s Coller International Partners III had a net IRR of 14.9 percent.

Calpers backed Coller’s last three funds committing $100m to each.