Against this backdrop, credit secondaries are emerging as a natural beneficiary of the current environment. Credit secondaries can benefit from the J curve effect by enabling investors to enter more mature portfolios at a discount, resulting in faster cash flows, earlier yield generation and reduced early stage performance drag compared with primary investments.
As private credit portfolios have grown over the past decade, so too has the need for flexibility. Both LPs and GPs are increasingly turning to the secondary market to manage portfolio construction, rebalance exposures and address liquidity needs.
For investors, secondaries offer several advantages: access to seasoned portfolios, greater visibility on underlying assets and the ability to deploy capital more quickly than in primary funds. In addition, current market conditions allow investors to benefit from meaningful discounts, and entry pricing can reflect a margin of safety that is difficult to achieve in primary markets – particularly for those with a strong network and primary book that provide access to the right transactions.
A credit secondaries strategy should be global in scope: the US is a core market because it is the largest private credit market and therefore the biggest generator of secondary volume; and Europe is also a meaningful and growing source of attractive opportunities. In secondaries, returns are driven by access to motivated sellers and discounted, high-quality portfolios, and those opportunities do not arise evenly across regions. Different regional dynamics, including regulation, liquidity pressure, portfolio rebalancing, and changing investor sentiment, can create dislocations at different times. A global mandate therefore matters not just for diversification, but for selectivity. It allows a manager to allocate where the best relative value is available rather than being tied to a single market window.
High-quality portfolios come to the secondary market across all market environments, as secondaries have firmly established themselves as an active portfolio management tool for investors.
Periods of uncertainty, however, tend to increase the volume of such opportunities and are often accompanied by particularly attractive entry terms. For investors who remain focused on underlying credit fundamentals and maintain a disciplined, long-term approach, the current market environment can therefore be a highly constructive environment to deploy capital.
The growth story for credit secondaries is expected to continue from the USD 20bn deal volume in 2025 mentioned above. According to Secondaries Investor, Private Credit Secondaries annual deal volume could reach 80bn USD by 2030.3