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.