The subject of secondaries markets is a controversial one. On the one hand, secondaries are an important 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 traders rebalance exposures and unlock liquidity forward of fund maturity. As soon as a small nook of personal markets, secondaries have grow to be a vital portfolio-management software. Increased charges are boosting yields but additionally slowing new deal exercise and increasing fund durations, tightening liquidity throughout non-public credit score.
For institutional allocators, the query is now not whether or not a non-public credit score secondary market will type, however how rapidly it’s going to scale and reshape value discovery.
In non-public credit score, secondaries at present symbolize simply 1% to three% of whole 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 initiatives one other ~70% enhance to $18 billion this 12 months. Even so, non-public credit score accounted for lower than 10% of whole secondary market quantity in 2024.
The speedy progress has been the results of a number of components: in the beginning, the explosion in major non-public credit score AUM, which has doubled since 2018. One more reason is the present macroeconomic framework. Increased charges are enticing for yield-hungry traders, who profit from the usually floating charges of direct lending offers. A high-rate surroundings additionally dampens new deal circulate 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 traders are utilizing secondaries as a risk-mitigation software to achieve 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 usually achieved on to a secondary purchaser. Reductions differ, however they’re normally 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 supply 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 lately, particularly as a result of they’re seen to “kick the can down the highway.”
A constructive improvement 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 revenue from day one, lowering uncertainty and focusing 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 threat, and decrease volatility.
In non-public credit score secondary transactions, events usually negotiate fee phrases — usually with deferred constructions resembling 20% of NAV paid upfront and 80% later to reinforce IRR — in addition to methods to allocate accrued charges, figuring out which occasion receives curiosity accrued between the reference date and shutting.
Liquidity Options and Market Innovation
One notable improvement 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 focusing on the wealth administration channel. Structured as interval or tender-offer funds, they supply periodic liquidity, balancing flexibility with the purpose of broadening the investor base, significantly non-public wealth shoppers looking for revenue and draw back safety. This democratization displays not solely rising funding demand but additionally gradual regulatory easing in lots of jurisdictions, which now allow better entry to personal markets by means of automobiles with outlined liquidity options.
Moreover, and maybe most curiously, platforms and information companies are rising. In non-public credit score, some corporations are exploring buying and selling platforms (“marketplaces” could be a greater phrase) for mortgage portfolios. No dominant change exists, however over time, know-how might make secondary transactions extra environment friendly and clear, maybe by means of some type of standardization. The phrase “blockchain” involves thoughts, but it surely’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 progressive liquidity options. Progress drivers resembling non-public credit score enlargement, investor demand for liquidity, and a conducive rate of interest surroundings counsel that secondaries will play an important function going ahead, doubtlessly rising to a $50+ billion annual quantity.
Anticipate new entrants — together with specialist funds and crossover traders — together with better convergence throughout secondary markets as built-in platforms span non-public fairness, credit score, and actual property. Standardization and transparency are additionally prone to enhance as volumes develop.
