Private credit's defining characteristic in its early development as an institutional asset class was its illiquidity. LP interests in private credit funds were multi-year commitments without meaningful exit options, and the underlying loans were bilateral instruments not traded on any secondary market. This illiquidity was accepted as a necessary cost of the spread premium that private credit offered over public alternatives.
The rapid development of the private credit secondaries market over the past several years is changing this dynamic in ways that have not yet been fully absorbed into how practitioners think about the asset class.
The Market That Emerged
The private credit secondaries market encompasses two distinct transaction types: LP-led secondary sales, in which existing LP investors sell their fund interests to specialized secondary buyers; and GP-led transactions, in which the fund manager offers existing LPs the option of liquidity through a structured process while simultaneously bringing in new investors at a reset valuation.
Both transaction types have grown rapidly, enabled by the emergence of specialized secondary buyers with expertise in private credit asset valuation and sufficient capital to provide meaningful liquidity at appropriate prices. Annual secondary transaction volume that was negligible in 2020 has grown to tens of billions of dollars in 2025-2026, with further growth expected as the private credit market matures.
What Changes
The implications of a functioning secondaries market for private credit are layered. At the LP level, the availability of secondary liquidity changes the fundamental risk profile of private credit from genuinely illiquid to semi-liquid — investors who need to access capital before fund maturity have a mechanism for doing so, albeit at a discount to NAV.
At the GP level, continuation vehicles and GP-led processes create a mechanism for managers to extend the duration of successful investments beyond fund terms while providing LP liquidity — a structural innovation that benefits both parties when implemented with appropriate governance.
At the market level, the secondaries market provides price discovery for private credit assets that has historically been absent — secondary transaction prices reveal information about how the market values private credit portfolios relative to manager-reported NAVs.
The Governance Question
The primary governance challenge in the private credit secondaries market is the conflict of interest inherent in GP-led transactions, where the same manager who values and manages the assets also structures and executes the liquidity process. Independent oversight, third-party valuation confirmation, and LP advisory committee engagement are essential safeguards against the most obvious forms of this conflict. The market is still developing the institutional norms and contractual frameworks needed to manage these tensions consistently.