The topic of secondaries markets is a controversial one. On the one hand, secondaries are a vital source of liquidity for both limited partners (LPs) and general partners (GPs) in private markets. On the other hand, their growth can be a signal of anemic exit opportunities.
In private credit, “secondaries” refers to the buying and selling of existing fund interests or loan portfolios — effectively a resale market that lets investors rebalance exposures and unlock liquidity ahead of fund maturity. Once a small corner of private markets, secondaries have become an essential portfolio-management tool. Higher rates are boosting yields but also slowing new deal activity and extending fund durations, tightening liquidity across private credit.
For institutional allocators, the question is no longer whether a private credit secondary market will form, but how quickly it will scale and reshape price discovery.
In private credit, secondaries currently represent just 1% to 3% of total allocations — a small share of the asset class. But they are expanding rapidly, doubling from $6 billion in 2023 to $11 billion in 2024. Evercore projects another ~70% increase to $18 billion this year. Even so, private credit accounted for less than 10% of total secondary market volume in 2024.
The rapid growth has been the result of several factors: first and foremost, the explosion in primary private credit AUM, which has doubled since 2018. Another reason is the current macroeconomic framework. Higher rates are attractive for yield-hungry investors, who benefit from the typically floating rates of direct lending deals. A high-rate environment also dampens new deal flow for direct lenders, contributing to slower fund liquidation.
Notably, the rise of secondaries is creating a dedicated investor base with capital earmarked specifically for these transactions. Reflecting the broad spectrum of private credit opportunities — from consumer and direct lending to specialty finance — some investors are using secondaries as a risk-mitigation tool to gain exposure to niche credit strategies.
How do Secondaries Work?
LP interests’ sales (historically most of private credit secondaries transactions) are typically done directly to a secondary buyer. Discounts vary, but they’re usually smaller for early-stage, diversified fund positions and higher for tail-end or highly concentrated positions. Transactions initiated by the GP include continuation vehicles — newly created vehicles that purchase a portfolio of loans from an older fund. Continuation vehicles are a preferred GP-led tool to recapitalize loan portfolios and offer investor liquidity. Continuation vehicles are increasing in volume and frequency, surpassing LP-led transactions in 2025. They have become the object of scrutiny recently, namely because they are seen to “kick the can down the road.”
A positive development distinguishing private credit secondaries from private equity (PE) secondaries is the tightening of discounts. Average bids for quality credit funds and loans have climbed from about 90% of NAV a couple years ago to the mid-90s to roughly 100% of fair value in 2024–2025. The gap with PE reflects the yield cushion—buyers earn income from day one, reducing uncertainty and targeting low-teens returns (for example, an 8% to 10% coupon at 90% to 95% of NAV)—as well as floating rates, which potentially lessen risk, and lower volatility.
In private credit secondary transactions, parties typically negotiate payment terms — often with deferred structures such as 20% of NAV paid upfront and 80% later to enhance IRR — as well as how to allocate accrued fees, determining which party receives interest accrued between the reference date and closing.
Liquidity Solutions and Market Innovation
One notable development is the rise of evergreen and semi-liquid vehicles channeling capital into private credit secondaries. In 2024–2025, several major secondary firms launched funds targeting the wealth management channel. Structured as interval or tender-offer funds, they provide periodic liquidity, balancing flexibility with the goal of broadening the investor base, particularly private wealth clients seeking income and downside protection. This democratization reflects not only rising investment demand but also gradual regulatory easing in many jurisdictions, which now permit greater access to private markets through vehicles with defined liquidity features.
Additionally, and perhaps most interestingly, platforms and data services are emerging. In private credit, some firms are exploring trading platforms (“marketplaces” would be a better word) for loan portfolios. No dominant exchange exists, but over time, technology may make secondary transactions more efficient and transparent, perhaps through some form of standardization. The word “blockchain” comes to mind, but it’s far-fetched at this stage.
Outlook and Implications
By late 2025, the global private credit secondaries market has grown exponentially, with deal volume hitting record highs and poised to accelerate further as secondary transactions become a routine portfolio tool.
The market’s structure — originally dominated by one-off LP sales — is now increasingly characterized by GP-led restructurings and innovative liquidity solutions. Growth drivers such as private credit expansion, investor demand for liquidity, and a conducive interest rate environment suggest that secondaries will play a crucial role going forward, potentially growing to a $50+ billion annual volume.
Expect new entrants — including specialist funds and crossover investors — along with greater convergence across secondary markets as integrated platforms span private equity, credit, and real assets. Standardization and transparency are also likely to increase as volumes grow.
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