What colour is Jeremy Coller’s hair? In 2017, the veteran secondaries investor and founder and chief investment officer of Coller Capital told an audience at an industry conference that it wouldn’t be until he had become somewhat of a silver fox that his firm would diversify its shareholder base.
“I think groups do need to become multi-shareholder over time,” he said at the IPEM 2017 conference in Cannes, speaking about ownership stakes in private equity firms. “We’ll have to do that when I get grey hair.”
Coller, who took part in a podcast discussion with Secondaries Investor at the end of last year, must have a few strands of white showing if the past 12 months are anything to go by. In May he made changes to the firm’s ownership structure for the first time in its history, ceding 25 percent of equity to his fellow partners, having previously held 100 percent of it. This week, the firm said it had sold a passive minority stake to GP stakes buyer Hunter Point Capital. A spokesperson for Coller confirmed to Secondaries Investor that the equity sold to HPC came from Coller’s own personal stake.
It’s a notable moment in the history of one of the secondaries market’s oldest firms. At the 2017 conference, Coller had sung the benefits of sole ownership and its ability allow a firm to “build out a vision”.
“I don’t know any group, any really successful private equity group, that has been successful with [for example] four equal private equity owners,” he said. “You need ownership. You either need one or maximum two entities to own a GP to start a business and be successful.”
LPs also benefit from having a sole owner structure as it can mean they have an advocate within the firm who can protect their interests and be accountable for everything that happens, he said.
The minority sale this week now means London-headquartered Coller has three ownership entities: its founder, its partners and Hunter Point. GP stakes buyers operating from a fund typically take around a 15 percent interest in a firm, according to conversations we had with multiple market sources over the past two weeks. With the transaction having “no change to governance” at Coller, this suggests Hunter Point acquired no more than a 24.9 percent stake, with Jeremy Coller still owning more than half of the equity in the firm he founded more than three decades ago.
Hunter Point will be pleased about how the capital is to be used: all of it will be “reinvested” in Coller funds, the two firms said in their statement disclosing the transaction. This seems to suggest that Jeremy Coller will use the proceeds to pay for his own GP commitment in the firm’s funds in market, which include the $12 billion-seeking Coller International Partners IX and its debut RMB fund, which is seeking 1.5 billion yuan ($218 million; €200 million).
What isn’t clear is whether Coller is using the proceeds to increase the percentage of his GP commitment to the firm’s funds in market, and a spokesperson for the firm declined to comment on this point. If this is the case – Secondaries Investor is not aware that it is – Coller would be hedging his bets by turning his firm’s ownership structure into a multi-shareholder one, while simultaneously increasing alignment with LPs via its funds.
As the firm looks to its next stage of growth – it has already made headway with its private credit and China strategies, and has registered a fund named Coller LP Secondaries – the balance between building out a vision for growth and maintaining alignment with LPs will be more important than ever.
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