Private Credit on the rise!

What holds true for retail investors also holds true for Private Equity (at least to a certain extent). The liquidity crunch, uncertainties surrounding tariffs, and a fragile geopolitical landscape have prompted investors to take a keen interest in private credit. This has left a mark on the secondaries in private credit. According to a report published by Campbell Lutyens, the corpus of secondary private credit deals is on the rise!

Much like in private equity, the private credit secondary market has experienced a sharp rise in sponsor-led transactions as firms seek solutions for liquidity amid higher interest rates and a slowdown in M&A and IPO activity. For the first time, GP-led deal volume is projected to surpass LP-led transactions in 2025, according to Campbell Lutyens’ report

Private-credit funds typically lend to a wider array of businesses, which makes their portfolios more diversified than those of most private-equity funds. Additionally, private-credit funds generally have shorter investment durations compared to the longer-term commitments characteristic of private-equity vehicles.

Credit funds tend to use more fund-level leverage than private-equity funds, which can intensify pressure on net IRRs over time. Early in a fund’s life, leverage can significantly enhance returns; however, as the fund matures, a growing portion of distributions must be directed toward repaying debt principal instead of going to limited partners.

By recapitalizing assets into a new continuation vehicle, credit managers can re-leverage the fund and realize gains, allowing investors to access liquidity while letting the remaining assets wind down naturally.

For example, in 2023, Coller backed a $1.6 billion continuation vehicle for Abry Partners to recapitalize assets from the Abry Advanced Securities Fund III, which originally closed in 2014 and included over 240 positions spanning more than 210 companies. More recently, Coller led the creation of a $3 billion continuation fund to recapitalize loans from two private-credit vehicles managed by TPG Twin Brook Capital Partners, raised in 2016 and 2018, respectively.

Looks like markets have taken a turn, and private credit is here to stay!