Private credit secondaries are becoming an increasingly important part of the private markets landscape. These transactions allow investors to buy and sell existing private credit exposures before the underlying investments mature.
For sellers, the secondary market can provide liquidity and portfolio flexibility. For buyers, it can provide access to seasoned, income-producing credit portfolios, often at a discount to reported net asset value (NAV).
The market has developed alongside the rapid expansion of private credit, creating a growing ecosystem of LP-led transactions, GP-led transactions, continuation vehicles and strategic solutions.
What Are Private Credit Secondaries?
Private credit secondaries are transactions in which ownership of existing private credit investments is transferred from one investor to another.
The underlying exposure can include:
- Private credit fund interests
- Individual loans
- Whole loan portfolios
- Other existing private credit exposures
A typical seller may be a limited partner (LP) seeking liquidity, portfolio rebalancing or changes to its allocation. The buyer receives exposure to an already-established portfolio of loans, providing greater visibility into the underlying investments than a traditional blind-pool commitment.
Transactions are often completed at a discount to the reported NAV, which can create an additional source of potential return for the buyer.
Why Is the Private Credit Secondary Market Growing?
The development of the secondary market is closely connected to the expansion of private credit itself.
The source material cites a private credit market approaching $2 trillion, while Coller Capital reported approximately $1.7 trillion of private credit AUM at the end of 2024, compared with approximately $300 billion in 2010.
As private credit funds mature and enter their harvest periods, investors increasingly need mechanisms to manage existing exposures. Secondary transactions provide one potential route for investors looking to adjust portfolios without waiting for the underlying investments to mature.
How Large Is the Credit Secondaries Market?
The credit secondaries market remains relatively small compared with the broader private credit market, but published estimates point to significant growth.
Estimates in the source material include:
- Approximately $11 billion of transaction volume in 2024
- Approximately $14.1 billion estimated 2025 volume
- More than $20 billion estimated 2025 market size in another industry estimate
- A projected $80 billion+ market by 2030 under one Carlyle AlpInvest scenario
PGIM reported a 46% CAGR between 2020 and 2024, while the market still represented less than 1% of total private credit AUM.
These estimates differ because providers measure the market using different definitions, periods and metrics. However, the published sources consistently describe credit secondaries as an early-stage market with substantial room for development.
LP-Led vs. GP-Led Credit Secondaries
Private credit secondary transactions generally fall into two major categories: LP-led and GP-led.
LP-Led Transactions
LP-led transactions are initiated by an existing investor in a private credit fund.
The seller may be looking to:
- Generate liquidity
- Rebalance a portfolio
- Adjust private credit exposure
- Manage allocation levels
The buyer receives an existing portfolio with current income and a history of performance.
GP-Led Transactions
GP-led transactions are initiated by the fund manager.
One common structure involves transferring a portfolio from an existing fund into a new continuation vehicle. Existing investors can then choose whether to receive liquidity or roll their interests into the new structure.
According to the source material, GP-led transactions were expected to represent approximately 60% of volume in 2025, compared with roughly 20% historically.
LP-Led vs. GP-Led
| Feature | LP-Led | GP-Led |
|---|---|---|
| Initiated by | Selling LP | Fund GP |
| Main motivation | Liquidity and allocation management | Extend holdings and provide liquidity |
| Buyer receives | Seasoned portfolio | Seasoned portfolio with deeper GP access |
| Alignment | More limited buyer influence | GP carry rollover and additional commitments |
| Common structure | Sale of fund interest | Continuation vehicle |
What Is a Credit Continuation Vehicle?
A credit continuation vehicle is a new fund established by a manager to purchase a portfolio from an existing fund.
This structure can allow existing investors to either:
- Sell their interests and receive liquidity, or
- Roll their interests into the new vehicle.
Unlike many private equity continuation vehicles, credit continuation vehicles are generally designed around diversified portfolios rather than a single asset or a small number of assets.
The new vehicle can also provide an opportunity to reset fund-level leverage and economics.
GP alignment can be strengthened through:
- GP carry rollover
- Additional GP capital commitments
- Refreshed governance
- Enhanced reporting
- LP Advisory Committee rights
The source notes that credit continuation vehicles often contain loans with weighted-average ages of approximately 3–4 years, with around 30–50% of underlying loan duration remaining in some 2025–26 transactions.
What Are GP Strategic Solutions?
GP strategic solutions represent another segment of the credit secondaries market.
These transactions are driven by broader institutional objectives rather than simply fund-level liquidity needs. Examples include:
- Balance-sheet optimization
- Regulatory capital management
- Funding-model changes
- Managed fund transactions
- Spinouts
- Evergreen or BDC restructurings
- Balance-sheet liquidity transactions
The source describes these transactions as one of the more structurally innovative areas of credit secondaries, particularly for banks, insurers and asset managers.
How Are Credit Secondaries Priced?
The headline price of a secondary transaction does not always represent the buyer’s actual economic entry point.
Buyers typically evaluate the effective discount, which can incorporate several factors:
- Headline price versus NAV
- Interim cash flows
- Deferred consideration
- Negotiated investor economics
- Fund-level leverage
- Fees and carry
- Waterfall structures
Voya Investment Management cites a 6–12% expected effective discount range and a potential 200–400 basis-point premium over equivalent primary strategies.
Loans purchased below par can also potentially provide a pull-to-par benefit as they approach maturity, although actual outcomes depend on the underlying credit performance and transaction structure.
How Do Buyers Underwrite Credit Secondary Portfolios?
Credit secondary underwriting is highly focused on the underlying loans.
Rather than relying only on portfolio-level statistics, buyers can perform bottom-up analysis of individual borrowers, particularly:
- Watchlist credits
- Highly leveraged borrowers
- Business quality
- Leverage
- Cash flows
- Covenant protections
- Sponsor behavior
Buyers may gather information from multiple sources, including the credit manager, private equity sponsors, co-lenders and comparable marks held by other managers.
Scale is another important consideration. PGIM notes that a typical direct-lending fund may contain around 60–80 underlying loans, while a credit secondaries fund can hold hundreds of loans.
This makes underwriting systems, data access and experienced credit professionals particularly important.
Why Do Investors Buy Credit Secondaries?
Investors can use credit secondaries for several portfolio-management objectives.
Discounted Entry
Purchasing existing interests below NAV can potentially improve the buyer’s entry economics.
Diversification
Secondary portfolios can provide diversification across:
- Managers
- Fund vintages
- Industries
- Obligors
- Geographies
- Security types
Limited Duration
Because the underlying loans are already seasoned, secondary investments may have shorter expected lives than newly originated private credit portfolios.
Voya cites expected duration of approximately 2–3 years for certain credit secondary investments.
J-Curve Mitigation
Because secondary buyers acquire existing portfolios that are already generating cash flow, they may avoid some of the early-stage characteristics associated with newly launched private market funds.
Greater Transparency
Buyers can often evaluate the actual underlying loans rather than committing capital to a portfolio that has yet to be built.
The source also cites PGIM’s observation that roughly 75% of loans experiencing payment defaults do so within their first three years, making the seasoning of a secondary portfolio an important underwriting consideration.
Credit Secondaries vs. Private Equity Secondaries
Credit secondaries use many concepts familiar from private equity secondaries, but the underlying assets and return drivers are different.
| Feature | Credit Secondaries | Private Equity Secondaries |
|---|---|---|
| Primary return driver | Yield and pull-to-par | Equity appreciation |
| Duration | Generally shorter | Generally longer |
| Volatility | Generally lower | Generally higher |
| Upside | More limited | Greater potential equity upside |
| Continuation vehicle | Generally diversified/full-fund | Often single or limited assets |
| Market penetration | ~1% fund turnover | ~2–3% fund turnover |
The source emphasizes that entry price is particularly important in credit secondaries because the underlying investments generally have more limited upside than equity investments.
What Skills Are Needed in Credit Secondaries?
As the market develops, firms are building dedicated credit-secondary capabilities.
Important functions include:
- Origination & sourcing — developing relationships and finding transaction opportunities
- Structuring & pricing — designing transactions and negotiating economics
- Underwriting & portfolio management — evaluating individual loans and portfolios
- Capital formation — raising capital to support secondary strategies
The market requires professionals who understand both private credit and secondary-market structures.
Employers increasingly look for professionals with a combination of:
- Deep credit underwriting experience
- Secondary-market structuring expertise
- Transaction sourcing relationships
- Portfolio-management capabilities
- Cross-asset private-markets knowledge
The ability to underwrite portfolios containing hundreds of loans is particularly important as the market scales.
The Future of Private Credit Secondaries
Private credit secondaries remain a relatively young segment of the private markets ecosystem. Current transaction volumes represent only a small percentage of overall private credit AUM, while industry estimates point toward continued growth.
The expansion of private credit, increasing fund maturities, investor liquidity requirements and the development of GP-led structures are all contributing to the evolution of the secondary market.
As more institutions participate, the market is likely to require increasingly specialized expertise across sourcing, underwriting, pricing, structuring and capital formation.
For investors and market participants, understanding how these transactions are structured—and how pricing, portfolio quality and underlying loan performance interact—is becoming increasingly important.
Conclusion
Private credit secondaries provide a mechanism for transferring existing private credit exposures between investors before maturity. The market includes LP-led sales, GP-led transactions, continuation vehicles and strategic solutions, each serving different liquidity, portfolio-management and institutional objectives.