The subject of secondaries markets is a controversial one. On the one hand, secondaries are a significant supply of liquidity for each restricted companions (LPs) and normal companions (GPs) in non-public markets. Then again, their progress is usually a sign of anemic exit alternatives.
In non-public credit score, “secondaries” refers back to the shopping for and promoting of present fund pursuits or mortgage portfolios — successfully a resale market that lets buyers rebalance exposures and unlock liquidity forward of fund maturity. As soon as a small nook of personal markets, secondaries have grow to be an important portfolio-management software. Greater charges are boosting yields but in addition slowing new deal exercise and lengthening fund durations, tightening liquidity throughout non-public credit score.
For institutional allocators, the query is not whether or not a personal credit score secondary market will type, however how rapidly it would scale and reshape value discovery.
In non-public credit score, secondaries presently symbolize simply 1% to three% of complete allocations — a small share of the asset class. However they’re increasing quickly, doubling from $6 billion in 2023 to $11 billion in 2024. Evercore tasks one other ~70% improve to $18 billion this yr. Even so, non-public credit score accounted for lower than 10% of complete secondary market quantity in 2024.
The fast progress has been the results of a number of components: at the beginning, the explosion in main non-public credit score AUM, which has doubled since 2018. Another excuse is the present macroeconomic framework. Greater charges are engaging for yield-hungry buyers, who profit from the sometimes floating charges of direct lending offers. A high-rate setting additionally dampens new deal move for direct lenders, contributing to slower fund liquidation.
Notably, the rise of secondaries is making a devoted investor base with capital earmarked particularly for these transactions. Reflecting the broad spectrum of personal credit score alternatives — from shopper and direct lending to specialty finance — some buyers are utilizing secondaries as a risk-mitigation software to realize publicity to area of interest credit score methods.
How do Secondaries Work?
LP pursuits’ gross sales (traditionally most of personal credit score secondaries transactions) are sometimes carried out on to a secondary purchaser. Reductions range, however they’re often smaller for early-stage, diversified fund positions and better for tail-end or extremely concentrated positions. Transactions initiated by the GP embody continuation automobiles — newly created automobiles that buy a portfolio of loans from an older fund. Continuation automobiles are a most well-liked GP-led software to recapitalize mortgage portfolios and provide investor liquidity. Continuation automobiles are growing in quantity and frequency, surpassing LP-led transactions in 2025. They’ve grow to be the article of scrutiny just lately, particularly as a result of they’re seen to “kick the can down the highway.”
A optimistic growth distinguishing non-public credit score secondaries from non-public fairness (PE) secondaries is the tightening of reductions. Common bids for high quality credit score funds and loans have climbed from about 90% of NAV a pair years in the past to the mid-90s to roughly 100% of honest worth in 2024–2025. The hole with PE displays the yield cushion—consumers earn earnings from day one, decreasing uncertainty and concentrating on low-teens returns (for instance, an 8% to 10% coupon at 90% to 95% of NAV)—in addition to floating charges, which doubtlessly reduce danger, and decrease volatility.
In non-public credit score secondary transactions, events sometimes negotiate fee phrases — usually with deferred constructions corresponding to 20% of NAV paid upfront and 80% later to reinforce IRR — in addition to how you can allocate accrued charges, figuring out which celebration receives curiosity accrued between the reference date and shutting.
Liquidity Options and Market Innovation
One notable growth is the rise of evergreen and semi-liquid automobiles channeling capital into non-public credit score secondaries. In 2024–2025, a number of main secondary corporations launched funds concentrating on the wealth administration channel. Structured as interval or tender-offer funds, they supply periodic liquidity, balancing flexibility with the aim of broadening the investor base, significantly non-public wealth shoppers in search of earnings and draw back safety. This democratization displays not solely rising funding demand but in addition gradual regulatory easing in lots of jurisdictions, which now allow higher entry to non-public markets via automobiles with outlined liquidity options.
Moreover, and maybe most curiously, platforms and information providers are rising. In non-public credit score, some corporations are exploring buying and selling platforms (“marketplaces” can be a greater phrase) for mortgage portfolios. No dominant alternate exists, however over time, expertise might make secondary transactions extra environment friendly and clear, maybe via some type of standardization. The phrase “blockchain” involves thoughts, nevertheless it’s far-fetched at this stage.
Outlook and Implications
By late 2025, the worldwide non-public credit score secondaries market has grown exponentially, with deal quantity hitting file highs and poised to speed up additional as secondary transactions grow to be a routine portfolio software.
The market’s construction — initially dominated by one-off LP gross sales — is now more and more characterised by GP-led restructurings and revolutionary liquidity options. Development drivers corresponding to non-public credit score growth, investor demand for liquidity, and a conducive rate of interest setting counsel that secondaries will play an important position going ahead, doubtlessly rising to a $50+ billion annual quantity.
Count on new entrants — together with specialist funds and crossover buyers — together with higher convergence throughout secondary markets as built-in platforms span non-public fairness, credit score, and actual property. Standardization and transparency are additionally prone to improve as volumes develop.
