Jeremy Coller: 2022 secondaries activity likely to have absorbed significant dry powder

Private credit continues to be one of the most dynamic areas of private markets, with Jeremy Coller expecting the private credit secondaries to grow around threefold in the coming three years.

Strong secondaries activity may have considerably eaten into the capital available to deploy into transactions, Coller Capital‘s founder and chief investment officer Jeremy Coller has said.

While secondaries fundraising has been strong, with buyers generally well-capitalised, buoyant secondaries activity that was expected in the second half of 2022 would be “sufficient to absorb most of the current stock of ‘dry powder’”, Coller wrote in July for the firm’s latest Annual Report and Financial Statements report for the year ending 31 March 2022.

The report was filed in the UK on 30 December.

Coller reiterated the point in a Secondaries Investor podcast in December, saying the biggest threat that could put a dampener on the market was an “easy” question to answer: fundraising.

“We do about 1 percent of our dealflow so that’s an enormous amount of investment opportunity left on the table,” Coller said.

In his letter, Coller said private credit continues to be one of the most dynamic areas of private markets, adding that LPs are increasingly likely to tap the secondaries market to reposition their credit portfolio, leading to strong growth in that corner of the market.

The firm closed on around $1.4 billion for its debut credit secondaries fund Coller Credit Opportunities I and co-investments in the first quarter of last year, according to a statement, nearly double its target.

Discussing the growth of the market with Secondaries Investor at the end of last year, Coller said the firm expected credit secondaries to grow to $17 billion, up from half a billion in 2012. Over the next four years, he expects the market to grow to $50 billion.

On opportunities for growth in the secondaries market more broadly, he said “everywhere” had room to expand, adding “every strategy becomes a secondary”.

“When I started we raised a €‎50 million fund and it took four years to raise and it invested in everything … we’ve been doing credit since 2009, but now that it’s a deep and very wide credit market, we launched [Coller Credit Opportunities I], and other groups have launched real estate and infrastructure funds,” he added.

Coller Capital’s net profit for the year ending 31 March decreased 1.8 percent from a year earlier to £3.78 million ($4.54 million; €4.29 million). Revenue fell 2.3 percent to £80.4 million.

The secondaries market has shown a robustness and flexibility through the uncertainty of the covid-19 pandemic as well as recent geopolitical shocks, Coller said in his letter. The firm believes these qualities will act as a basis for further evolution in the market’s scope and sophistication.