The credit secondaries market is surging and should be the fastest-growing segment of the secondaries market for years to come. A record number of investors entered the market for credit secondaries in 2024, a year marked by several marquee transactions and the growth in general partner (GP)-led deals, including continuation vehicles. Halfway through 2025, this trend continues to accelerate at a fast pace.
Based on Jefferies’ advised transactions and our credit secondaries market survey, the volume of credit secondaries transactions rose from $6 billion in 2023 to $10 billion in 2024. We expect the volume of credit secondaries transactions to increase to $17+ billion in 2025, representing a CAGR of 70%+ since 2023.
Meanwhile, the mix of transaction type in the credit secondary market is changing rapidly. The survey found that in 2024, 62% of transaction volume were limited partners (LPs) selling commitments in credit funds (i.e., LP-led), while 38% were led by GPs. In the second half of 2024, GP-led deals picked up, and Jefferies expects GP-leds to account for more than 70% of transaction volume in 2025.
In many ways, private credit secondaries are situated where the much larger private equity secondaries market was approximately five or so years ago.
Private equity secondaries remain the dominant force today, with volumes exceeding $160 billion annually and expected to reach $200 billion by the end of 2025. Private credit secondaries, while a fraction of the size, are growing quickly and could reach $40+ billion by 2027.
A perfect storm of factors is driving the growth of the credit continuation vehicle market:
- LPs Desire for Liquidity: LPs are increasingly seeking liquidity solutions, as traditional exit routes (M&A and IPOs) have continued to experience a slow recovery, resulting in lower-than-expected distributions. In some cases, the extended hold periods have led to fund leverage being paid down faster than anticipated, resulting in less optimal debt-to-equity fund ratios and diminishing fund returns.
- Inflows of Dedicated Capital: There is a significant influx of capital specifically targeted at credit secondaries with the appropriate cost of capital. Historically, investors were targeting mid-teens-plus returns, but with capital from dedicated secondary credit funds, insurance companies, sovereign wealth funds, family offices, and alternative asset managers, among others, targeting direct lending (low double-digit returns) and opportunistic credit (mid- to high-teen returns), the market is ripe for continued growth. This has led to attractive pricing and an increased appetite for scaled, diversified portfolios.
- Blue-Chip Lender Adoption: A number of blue-chip private credit managers have utilized continuation vehicles to provide comprehensive liquidity solutions for their respective LP bases, given the narrowing bid-ask spread in the market and benefits afforded to all stakeholders. This adoption continues to fuel considerable interest from other private credit managers.
- Challenging Fundraising Conditions: As private credit funds encounter headwinds in a challenging fundraising environment, continuation vehicles enable GPs to access dry powder while providing their LPs with an optional liquidity event that locks in attractive returns today. This can be particularly relevant for direct lending funds where leverage facilities are accelerating their paydown, thereby deteriorating the funds’ go-forward IRR.
- Regulatory and Market Shifts: Tighter bank lending standards and evolving regulations have pushed more activity into private credit markets, as borrowers value the speed and flexibility of these solutions. The private credit market has grown substantially since the 2008 Financial Crisis, with tremendous amounts of capital ready to be “unlocked” through credit secondary solutions.
- Emergence of Specialist Strategies: As the credit secondaries market continues to deepen, appetite for more opportunistic credit strategies (including mezzanine, opportunistic, venture, and annual recurring revenue, among others) will continue to develop.
The Jefferies survey also identified significant changes in credit secondaries pricing. With a growing base of dedicated capital able to underwrite credit secondaries transactions at the right cost of capital, pricing has been enhanced materially for both LP and GP-led transactions. GP-led transactions for direct lending portfolios, in particular, priced between 95% and 100%.
All of this helps explain why credit secondary volume in the first half of 2025 was driven primarily by GPs. So far this year, there have been five credit secondaries transactions that exceeded $1 billion (Jefferies advised clients on three of them).
While more secondary credit investors prefer senior-secured, sponsor-backed direct lending portfolios, 2024 also saw many transactions with more diverse risk profiles close. Of the $10 billion in transaction volume in 2024, the Jefferies survey found 65% was in direct lending, 19% in opportunistic transactions, and 16% in mezzanine transactions.
The estimated dry powder from dedicated pools of capital in the market today exceeds $20 billion. The credit secondaries market is getting deeper and more diverse, and Jefferies has continued to identify new investors who are actively entering and in the process of evaluating their entry into this market.
The perfect storm of tailwinds propelling the credit secondaries market – and continuation vehicles in particular – shows no signs of abating, and investors are likely to find compelling opportunities in this market for the rest of 2025 and beyond.
