Jeremy Coller: LPs will use secondaries to ‘reposition’ credit portfolios

Investors will increasingly tap the secondaries market to manage their private credit exposure, according to Coller Capital‘s founder and chief investment officer.

Private credit has become one of the “most dynamic” parts of the private markets industry and has the highest recent and forecast growth rates among alternatives, Jeremy Coller wrote in the firm’s latest annual report for the year ending 31 March 2023.

“We believe LPs are increasingly likely to use the secondaries market to reposition their credit portfolios, leading to strong growth in the private credit secondaries market,” he wrote.

Private credit secondaries accounted for 3 percent of deal volume in the first half of last year and 4 percent during full-year 2022, according to data from Greenhill. Firms including Tikehau Capital, Pantheon, Ares Management and StepStone are active with dedicated secondaries funds to the asset class.

Apollo Global Management is seeking $2 billion for a credit secondaries fund, Bloomberg reported this month.

Coller is in market with its sophomore credit secondaries fund with an undisclosed target, according to Secondaries Investor data. Its debut fund, Coller Credit Opportunities I, closed on $1.4 billion in 2022, ahead of its $750 million target.

The firm is also in market with its ninth flagship secondaries fund with a $12 billion target.

Coller’s founder also noted that macroeconomic and geopolitical headwinds continued to abound as of mid-July, and that private markets investors and fund managers were reshaping investment opportunities and portfolios amid this environment.

“The private capital secondary market remains the key mechanism for facilitating these changes at speed,” Coller wrote.

The secondaries market “remains in balance” and buyer capital and market volume are at comparable levels, he added.

Coller made a pre-tax loss of £2.7 million ($3.4 million; €3.1 million) in the year to end-March, driven by an increase in administrative expenses. It had made a pre-tax profit of £3.8 million the prior year.

The annual report is dated 20 July and was uploaded to the UK’s Companies House this month.