Coller Capital joins GPs in search for private wealth allocations

The secondaries market lends itself particularly well to private wealth, he said, because other private market allocations like private equity tend to have high minimum commitments and drawdown policies that do not lend well to private wealth.

"One of the aspects that make it so suitable is the risk-reward equation – fewer than 1% of secondaries funds have ever lost money, the figure is much higher in private equity and even private credit," said Elmhirst.

The other two factors are that secondaries portfolios, across both LP and GP-leds, are highly diversified and typically have a portfolio of 2,000 investments rather than 20-30; and the liquidity profile, which is more favourable as secondaries GPs tend to invest in assets that are close to exit and thus de-risk quickly, he added.

Coller Capital's Private Wealth Secondaries Solutions (PWSS) business will provide a combination of solutions that suit the different biases and needs of clients, said Elmhirst. The GP said in a statement that it will leverage its relationships with private banks, wealth managers and investment advisors to distribute the products it creates and manages.

"Private markets penetration for private wealth is in the low single digits, the opportunity to shift that by even just one percentage point could raise a huge amount of capital. We don't need much of that capital for it to be hugely transformative," said Elmhirst.

Other GPs are in the market to raise funds entirely backed by high-net-worth individuals (HNWI), with Apollo and Goldman Sachs, among others, planning such vehicles for private credit.

Elmhirst insists that the effort is not driven by an ongoing capital crunch among more institutional LPs. However, secondaries GPs are suffering the same woes as their private equity peers, with fundraising down 35% in 2022 to EUR 20.9bn versus the year prior, according to Unquote Data. Fundraising this year has already tipped that, thanks predominantly to Blackstone's USD 25bn final close of Strategic Partners IX.

Elmhirst will lead the PWSS team, having joined Coller in April 2022 after 25 years at UBS, where he led the bank's private markets effort in its global wealth management division. He is joined by two long-term Coller employees: Jon Freeman and Mark Hindriks.

Coller does have a history of targeting private wealth, with the segment investing in prior funds via private bank feeders for more than ten years, but the new arm will be a properly staffed platform interacting with banks and advisors, with an operational framework to educate clients on the product.

The GP will lean on this existing client base but has started to build out a distribution resource focused on the US, and will also ultimately expand elsewhere.

Giving private wealth clients too much liquidity choice has caused problems in wider markets. Last year Blackstone faced a run on an HNWI-targeted real estate vehicle, leaving the GP forced to limit withdrawals.

"We're alive to the issue of heightened desire for liquidity," Elmhirst said. "It's really important not to create liquidity mismatches, you've got to strike a balance. I don't think there is a magic solution to turning private products into liquid products but there are opportunities to provide better liquidity while still capturing some illiquidity premium."

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