Jeremy Coller, the founder of Coller Capital, gets annoyed by the “misnomer’ that private-equity secondaries are somehow secondhand and, to put it in his inimitable phrase, “crap”. It’s a sensitive point for Coller, who founded his company in 1989 and was one of the world’s first purchasers of existing private-equity interests, later moving on to create general partnerships in which Coller then became a limited partner. The creation of Bridgepoint in 2000 following Coller’s purchase of Natwest’s 292-company privateequity portfolio is an example. Coller points out that 99.75 per cent of the world’s listed markets turnover is trading in ‘secondaries’, in the sense of being assets that somebody has owned before. “They’re not adding any new capital, they’re just greasing the wheel of liquidity”. Given that 56 per cent of the private-equity assets raised in all of history were raised between 2004 and 2008, Coller says that will inevitably flow into a series of record years for secondaries’ fund-raising and activity. “I predict that in 25 years they’ll call what we do ‘private equity’, and the general partners will be investors in ‘primaries’,” he says, sounding rather happy at the turning of the tables such a change in the lexicon would represent. Coller Capital today analyses 3,500 underlying companies, but what some might see as a logical leap into becoming a general partner themselves would be “career limiting” according to Coller, given the rule of thumb is that an individual private-equity portfolio manager can only really handle a presence on five investee boards at any one time. But here’s a thing about privateequity secondaries: despite the good points made by Coller, it is still what most in Australia would consider a niche asset class. Yet from what Unbalanced can make out, there is an astonishing number of secondaries managers who’ve been able to crack it for mandates in Australia. There are at least 12 managers with at least one client, and the defined-benefit giant, Australia Post Superannuation Scheme, has no fewer than four secondaries managers on its books: HarbourVest, Pantheon, Lexington Partners and the local Quay Partners.
Pining for when custody was young and free After 45 years in the backoffice, who better than QSuper’s head of operations, Kyle Ringrose, to conduct the history lesson embedded in the final session of last month’s Investment Administration Conference – “Master Custody: Past, Present and Future” . In those simpler times, before anyone thought of investing in shares offshore, Ringrose recalled the days when your friendly local funds manager could look after all your custody needs. “There’d be an army of semiretired gents wandering around the capital cities, carrying big sacks of scrip and bank cheques to exchange with the brokers. The valuation of your portfolio was never less than a week old!” Ringrose remembered. “‘Performance reporting’ was no problem – you just plucked a couple of numbers out of the general ledger and added them up on the back of an envelope.” Clearly, a fair bit has changed for the better when it comes to the provision of custody services. However, the move away from funds management part-timers to specialised, sophisticated custodians has had one major drawback, Ringrose wryly noted. “Funds managers used to do your custody for free.” Still, the talk on the floor at the conference would indicate that State Street, in its enthusiasm to rebuild the master custody market share sold off to Commonwealth Custodial Services in 2000, has gone close to doing likewise!
