Credit secondaries: Stepping into the spotlight

Over the past decade, private credit has emerged as one of the fastest growing segments within private markets, evolving from a niche allocation into a central pillar of institutional portfolios. As capital has migrated away from traditional banking channels and into privately originated lending strategies, investors have increasingly embraced private credit for its potential income generation, downside mitigation, and diversification benefits.

In this paper, Pacharbor Capital Group AlpInvest explores where credit secondaries stand today, how they work, and why we believe disciplined underwriting and information advantage will define this market.

KEY TAKEAWAYS

• Credit secondaries have arrived at last. We estimate that credit secondaries represented a $20+ billion market in 2025, and believe that it can grow to $80+ billion by 2030 (~$55B in GP-centered transactions vs. ~$25B in LP centered transactions).¹ This is largely driven by the continued expansion of the nearly $2 trillion private credit market and broader industry adoption of secondary solutions. What was once episodic and fragmented has quickly evolved into a scalable, repeatable market. Despite rapid growth, the market remains materially underpenetrated relative to the more mature private equity secondary market, suggesting substantial runway ahead.
• Dedicated capital formation marks a clear inflection point. While the credit secondary market has existed for many years, credit secondaries has emerged over the past five years as a distinct asset class with increased capital formation and new market entrants opening significant avenues for growth and market depth.
• Different types of credit secondaries address distinct Limited Partner (“LP”) and General Partner (“GP”) objectives. We classify credit secondaries into three types of transactions: (i) LP interest purchases; (ii) GP-centered continuation solutions; and (iii) GP strategic solutions, particularly for captive managers. These transactions offer compelling solutions for both GPs and LPs, who are increasingly accessing the credit secondaries market to achieve their strategic objectives.
• Pricing may not tell the whole story in credit secondaries. Credit secondary pricing is still complex with the effective price at closing often quite distinct from the “headline price” quoted by market participants. This is driven by various factors such as interim cash flows, deferrals, varied investor economics, fund-level leverage and other structural mechanics. Buyers are seeking entry pricing that provides sufficient margin of safety to absorb potential future credit losses and can offset the embedded economics of underlying managers.
• Disciplined underwriting, information asymmetry and bespoke structuring. Investors with rigorous underwriting standards, proprietary information derived from being part of broader platforms with deep private market relationships, technology advantages and creative structuring capabilities are well positioned over the long term.
• Credit secondaries as a core portfolio building block. Overall, we believe that credit secondaries will play an increasingly important role in many institutional investment portfolios. For many LPs seeking private credit exposure, we anticipate that credit secondaries will constitute a core allocation in the coming years.
• Market-agnostic strategy with potential outperformance compared to other asset classes during dislocations. Investors may pursue credit secondaries as an attractive alternative to traditional direct lending investments, given their potential return profile as well as diversification and duration characteristics. Additionally, investors may see credit secondaries as a countercyclical allocation that can benefit from credit market dislocations through increased purchase price discounts and improved asset visibility.

^{1 Pacharbor Capital Group AlpInvest internal market analysis. Assumes Credit Secondaries market grows at ~30% 5-year CAGR (in-line with historical Equity Secondaries growth) with GP-Centered Secondaries representing ~70% of the market based on AlpInvest predictions of the GP-Centered market becoming a larger portion of the overall credit secondaries industry. Estimates or forecasts are presented for illustrative purposes only. Actual results may differ materially from those anticipated and should not be relied upon as a basis for investment decisions or future performance.}