With the growth and maturation of private credit, financing the global economy has undergone massive change. Borrowers are increasingly moving outside traditional financing channels for flexible solutions that meet their capital needs. For investors, private credit can act as a source of stable income and attractive risk-adjusted returns, complementing traditional fixed income allocations. A broad range of strategies, including direct lending, mezzanine financing, distressed debt, and opportunistic credit, offer diverse opportunities. Alongside this expansion of the private credit universe, the secondaries market is a growing opportunity that has been gaining traction in recent years, reflecting demand for liquidity solutions and an agile approach to managing credit exposures in a dynamic environment.
As private credit allocations grow, credit funds mature, and the realization pace from these investments slows, limited partners (LPs) and increasingly general partners (GPs) are turning to the secondaries market to alleviate liquidity pressures and strengthen portfolio management in an evolving credit landscape.
An Expanding Market Opportunity
The credit secondaries market is expanding quickly. It grew at a CAGR of 46% between 2020 and 2024, outpacing private equity secondaries.1, 2 This growth is driven by several factors. Private credit AUM increased by approximately one-third from 2020 to 2024, eclipsing $1.87 trillion, and is forecast to hit $2.46 trillion by 2028 (Exhibit 1). Meanwhile, credit secondaries volumes account for less than 1% of total private credit AUM—smaller than the 2-3% share that private equity secondaries have built.3 This suggests that credit secondaries have plenty of room to grow as adoption increases.
Although private credit investments are typically self-liquidating, repayment timelines have become increasingly unpredictable. The use of loan maturity extensions, amend-and-extend transactions, and payment-in-kind (PIK) interest have prolonged fund lifecycles and slowed distribution cycles. M&A activity, which has historically served as a catalyst for early exits, has decelerated, also extending loan maturities. With some investors experiencing delayed cash flows, these market trends reinforce why the secondaries market may become an increasingly valuable mechanism for managing liquidity and duration risk in private credit portfolios.
The slow realization pace from private credit funds, which has led to delayed cash flows and growing mismatches between asset maturities and fund terms, adds to the appeal of the secondaries market—as evidenced by a lower-for-longer median distribution to paid-in capital (DPI) that has settled below 1.0x since 2016 (Exhibit 2).
Growth in the credit secondaries market has also been supported by GP-led transactions as more GPs tap the market to enhance DPI and lock in returns for their LPs. While LP-led transactions have been the dominant driver of secondaries activity, GPs are fueling growth as they seek to diversify their investor base, manage the lifecycle of funds, or create continuation vehicles that extend the holding period of attractive assets and provide existing LPs with the opportunity to cash out or reinvest. Dedicated capital inflows supported a significant increase in GP-led secondaries activity in 2024 and the first half of 2025, contributing to overall market growth.
Success in navigating the evolution of credit secondaries will require expertise in origination and structuring, the ability to underwrite and customize a wide range of transactions, and established relationships with issuers, intermediaries and sponsors.
Utilizing Secondaries to Enhance Credit Portfolios
There are several key portfolio benefits to utilizing the credit secondaries market, including:
- Risk-return profile: Investors providing liquidity through credit secondaries are often compensated in the form of a discount off the current net asset value (Exhibit 3). As a result, direct lending investors can tap the secondaries market for an immediate uplift in return for comparable direct lending portfolios.
- Diversity in assets: Through credit secondaries, investors are gaining efficient access to a broad swath of direct lending funds with exposure to an array of GPs, managers, economic sectors, global regions, vintages, and issuers. A typical direct lending fund might have around 60-80 underlying loans, for example, versus the hundreds of loans in a typical credit secondaries fund.4
- Risk management: As a secondary buyer, investors get a transparent view into most assets and underlying loans, limiting blind pool risk. Meanwhile, risks can be priced in to mitigate future losses, as discounts provide investors with a buffer to manage potential headwinds. Credit secondaries also offer an entry point that aligns with more seasoned loans that have demonstrated solid performance. Roughly 75% of loans that experience payment defaults do so within the first three years.5
- Large supply-demand imbalance: While there is plenty of flow into credit secondaries, only a subset of this capital has been allocated. This imbalance allows investors to be a selective buyer of attractive assets and quickly deploy capital.
Summary
Private credit secondaries are becoming increasingly valuable to CIOs as a strategic portfolio management solution that enables them to fine tune credit exposures as market dynamics evolve. As a secondary buyer of attractive assets, investors may seek to complement or enhance returns relative to a traditional credit strategy, particularly with a focus on middle-market loans that tend to offer better terms and higher yields. Investors navigating the fast-developing credit secondaries market may benefit from working with managers that have longstanding relationships, advantages in sourcing deals, and deep underwriting expertise across the credit spectrum.
1 Evercore. (2025, July). H1 2025 Secondary Market Review. Accessed December 2025.
2 Evercore. (2025, February). FY 2024 Secondary Market Review. Accessed December 2025.
3 Macfarlanes. (2025, May 22). Unpacking Private Credit Secondaries. Accessed December 2025.
4 IEQ Capital. Private Credit Secondaries: An Evolving Opportunity for UHNW Portfolios. Accessed January 2026.
5 Proprietary PGIM data as of December 31, 2024. Represented as a % of total defaulted AUM (outstanding $ as of the date of default).
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