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 basic companions (GPs) in non-public markets. However, their progress generally is 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 additionally slowing new deal exercise and increasing fund durations, tightening liquidity throughout non-public credit score.
For institutional allocators, the query is not whether or not a non-public credit score secondary market will type, however how shortly it would 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 tasks one other ~70% enhance to $18 billion this yr. 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: before everything, 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 usually floating charges of direct lending offers. A high-rate setting additionally dampens new deal movement 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 client and direct lending to specialty finance — some buyers 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 completed 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 autos — newly created autos that buy a portfolio of loans from an older fund. Continuation autos are a most popular GP-led software to recapitalize mortgage portfolios and supply investor liquidity. Continuation autos 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 revenue from day one, decreasing 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 danger, and decrease volatility.
In non-public credit score secondary transactions, events usually negotiate cost phrases — usually with deferred buildings comparable to 20% of NAV paid upfront and 80% later to reinforce IRR — in addition to easy methods to allocate accrued charges, figuring out which get together 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 autos 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 objective of broadening the investor base, notably non-public wealth shoppers in search of 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 larger entry to non-public markets by means of autos 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” can be a greater phrase) for mortgage portfolios. No dominant alternate exists, however over time, know-how could make secondary transactions extra environment friendly and clear, maybe by means of some type of standardization. The phrase “blockchain” involves thoughts, however 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 report 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 comparable to non-public credit score growth, investor demand for liquidity, and a conducive rate of interest setting recommend that secondaries will play an important function going ahead, doubtlessly rising to a $50+ billion annual quantity.
Count on new entrants — together with specialist funds and crossover buyers — together with larger convergence throughout secondary markets as built-in platforms span non-public fairness, credit score, and actual belongings. Standardization and transparency are additionally prone to enhance as volumes develop.
