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September 16, 2025 | 9 min read
In the ever-evolving landscape of private markets, credit secondaries have emerged as a fast-growing, compelling investment opportunity. This undercapitalized and growing market has the potential to become one of the largest segments of global private markets. For investors, understanding the dynamics of credit secondaries and how they can enhance portfolio returns while mitigating risks is crucial.
In this paper, we examine the strategic advantages of credit secondaries, including their potential to deliver enhanced returns, increased portfolio diversification, and early access to a rapidly growing segment of private markets. We also outline the scope of the credit secondaries opportunity, while offering guidance on identifying the most important qualities when selecting a credit secondaries manager.
The private credit market has undergone significant transformation since the Global Financial Crisis (GFC). Fixed income allocators, forced to look beyond traditional allocations to meet yield targets, turned to private credit as an alternative. Concurrently, regulatory changes compelled banks to reduce their lending to middle-market businesses. Today, bank lending constitutes only 12% of middle-market lending, down from over 75% pre-GFC.1 The broadly syndicated loan (BSL) market, another key source of middle-market lending, now represents just 27% of non-bank financing, down from nearly 65% pre-GFC.2
Private credit has evolved to become the primary source of credit for private businesses, filling the gap left by banks and the BSL. It has grown into an institutional asset class, with more than $1.6 trillion of capital, rivaling the size of the high-yield bond and leveraged loan markets, and is expected to have an estimated compound annual growth rate of 13% between now and 2030 (see chart below).
Source: Preqin 2024 Global Report: Private Debt. For illustrative purposes only. Past performance is not a reliable indicator of future results.
Many allocators invest in private credit out of their public fixed income allocations, trading liquidity for higher yields. Other allocators have dedicated private credit allocations, often sitting alongside private equity allocations, intended to provide diversification and accelerated liquidity relative to other, longer duration strategies in the private markets. However, private credit is an illiquid asset class. Private loans are not traded; therefore, there is no natural mechanism to liquidate loans prior to a refinancing event or maturity. For LPs in private credit funds who need to adjust their portfolios or address liquidity concerns, private credit secondaries offer an effective solution.
Secondary investment occurs when a buyer, like HarbourVest, purchases existing private assets. While secondary investments can be executed in various ways, all secondary transactions represent a means for private asset investors to generate liquidity in place of traditional organic exits.
Private credit secondaries allow for the buying and selling of existing private credit funds after they’ve already been originated or deployed. Unlike committing capital to new loans or funds, secondaries allow investors to step into seasoned portfolios, often at discounted valuations and with greater visibility into performance. These transactions can be initiated by limited partners (LPs) seeking liquidity or portfolio rebalancing, or by general partners (GPs) restructuring funds to accelerate liquidity back to their LPs.
LP interests in one or more private funds are sold by a limited partner directly to a secondary buyer.
A general partner, in close partnership with a secondary buyer (or buyers), develops liquidity solutions which are then offered to the GP’s limited partners.
Private credit secondaries offer a compelling mix of shorter duration, accelerated cash flow, and reduced blind pool risk, making them an increasingly strategic way to access income-generating private credit exposure without the long ramp-up periods typical of primary allocations. Here’s a deeper look at some of their key benefits:
Credit secondaries offer an enhanced return profile over underlying private credit funds, with quicker deployment, accelerated DPI, J-curve mitigation, reduced blind pool risk, immediate cash yield, low volatility, and potential strong absolute and relative returns. Credit secondaries can also capitalize on market dislocations and the overall undercapitalization of the market to capture discounts.
Credit secondaries can reduce the risk in an allocator’s credit allocation by providing a more diversified portfolio. Instead of exposure to 70-80 companies, a secondaries portfolio will typically have exposure to thousands of underlying loans, minimizing the impact of a default or impairment in any underlying position. It also offers vintage diversification across prior vintages, which is particularly interesting to new entrants to the private credit market.
Approximately two-thirds of defaults happen in the first three years of a loan’s effective life (see chart below); This is because a loan is at its riskiest point when it is first issued- leverage is the highest, EBITDA add backs are the most significant and the management team and PE sponsor are often new. Secondary buyers have the opportunity to evaluate seasoned pools of loans that have had time to exhibit under writable operating performance. This allows the secondary buyer to better calibrate and price default risk, which provides valuable downside protection relative to making primary commitments in the credit market.
Source: Proskauer Private Credit Default Index, as of June 30, 2024. For illustrative purposes only. Past performance is not a reliable indicator of future results.
We believe the credit secondaries market is sufficiently scaled to support multiple winners but remains highly undercapitalized, allowing buyers to capture attractive discounts with early gains and predictable cash flows. Due to the diversified nature of these assets, investors are taking advantage of the opportunity to earn higher returns while taking less risk than by investing in the asset class directly.
Data from Jefferies highlights the market’s growth. Credit secondary transaction volumes rose from $6 billion in 2023 to $10 billion in 2024 to an estimated $17+ billion in 2025 – a CAGR of 70%+ since 2023. Estimates place 2027 volume as high as $40B+ (see chart below).5 Despite this growth, the market is currently undercapitalized, with only 4% of secondaries capital sitting in dedicated credit funds.6 This is creating two notable opportunities for credit secondary investors: the potential for enhanced returns and a more favorable risk profile.
Transaction Volume Source: Jefferies and HarbourVest, as of July 8, 2025. 2025 and 2027 figures are estimated by Jefferies. 2026 figure reflects HarbourVest’s estimate based on Jefferies data.
Dry Powder Source: Evercore FY 2024 Secondary Market Review, as of February 2025. For illustrative purposes only. Past performance is no guarantee of future performance.
As this market has evolved, GP-led deals have become a prominent fixture in this market. To put this trend in perspective, in 2024, only one GP-led credit secondary deal exceeded $1 billion. By comparison, there were five such deals in the first six months of 2025.7 In fact, GP-led deals are expected to account for 60% of transaction volume in 2025, surpassing annual LP-led transactions for the first time ever.8
The increase in GP-led transactions has been driven, in part, by prominent private credit managers employing continuation vehicles to deliver comprehensive liquidity solutions for their respective LP bases, which is a trend that we expect to continue.
Allocating to credit secondaries serves as an effective mechanism to establish or enhance a private credit program, offering enhanced portfolio resilience and access to diversified risk premia. Strategic collaboration with an established manager—one with demonstrable expertise and an established track record in both private credit and secondary transactions—can increase the likelihood of a superior outcome. When assessing potential partners consider the attributes that we believe distinguish a truly capable manager:
Market position: HarbourVest has been executing transactions in the PE secondaries market for 38 years. Over that period, we have committed $59 billion of LP capital across 500 transactions and typically rank in the top five firms for annual deployment in secondary transactions.
Lead arranger/co-lender proficiency: Importantly, we occupy a distinct position as a lead arranger in the secondary market and a co-lender in the credit market. This allows us to drive terms and structure on secondary transactions, while mitigating potential conflicts of interest with lead lenders in the credit market. We have been operating in this capacity for over 20+ years and currently manage over $8 billion of dedicated private credit AUM. And with our credit primary capital resources, we can be a full-service provider to private credit GPs.
Credit expertise: Our intimate familiarity with leaders in the private credit market, coupled with our underwriting discipline and our position as a co-lender, allows us to participate in the full aperture of the credit secondaries market, while maintaining a high degree of selectivity and underwriting discipline.
Dedicated Quantitative Investment Sciences (QIS) team: We have a team of over 30 data scientists who provide the quantitative support needed to accurately model the cash flow profile of a portfolio of underlying assets. This team enhances our ability to make informed investment decisions and optimize portfolio performance.
Proof of concept: Over the course of the past 20 years, HarbourVest has deployed approximately $1.2 billion of LP capital to credit secondaries across 19 transactions in our PE secondary strategy.
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The credit secondaries market presents a compelling opportunity for private markets investors, offering a combination of enhanced liquidity, accelerated deployment, and access to seasoned credit portfolios at potentially discounted valuations.
We believe HarbourVest Partners’ multi-manager, GP-centric platform positions us as a counterparty of choice, enabling us to access the widest opportunity set in the industry and exercise strong investment selectivity. We believe HarbourVest’s expertise, access to deal flow, and established track record position us as a leader in the burgeoning credit secondary market. We invite you to join us in capitalizing on this differentiated and timely investment opportunity.
Diversification does not ensure a profit or protect against a loss.
HarbourVest Partners, LLC is a registered investment adviser under the Investment Advisers Act of 1940. This material is solely for informational purposes and should not be viewed as a current or past recommendation or an offer to sell or the solicitation to buy securities or adopt any investment strategy. The opinions expressed herein represent the current, good faith views of the author(s) at the time of publication, are not definitive investment advice, and should not be relied upon as such. This material has been developed internally and/or obtained from sources believed to be reliable; however, HarbourVest does not guarantee the accuracy, adequacy, or completeness of such information. There is no assurance that any events or projections will occur, and outcomes may be significantly different than the opinions shown here. This information, including any projections concerning financial market performance, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. The information contained herein must be kept strictly confidential and may not be reproduced or redistributed in any format without the express written approval of HarbourVest.
Nothing herein should be construed as a solicitation, offer, recommendation, representation of suitability, legal advice, tax advice, or endorsement of any security or investment and should not be relied upon by you in evaluating the merits of investing in HarbourVest funds or any other investment decision.
An investment in the private markets involves high degree of risk, and therefore, should be undertaken only by prospective investors capable of evaluating the risks of the Fund and bearing the risks such an investment represents. The following is a summary of only some of the risks of investing in private markets.
Risks Related to the Structure and Terms of a Private Markets Fund. Investments in a fund of funds structure may subject investors to additional risks which would not be incurred if such investor were investing directly in private equity funds. Such risks may include but are not limited to (i) multiple levels of expense; and (ii) reliance on third-party management. In addition, a fund may issue capital calls, and failure to meet the capital calls can result in consequences including, but not limited to, a total loss of investment.
Illiquidity of Interests; Limitations on Transfer; No Market for Interests. An investor in a private markets fund or account will generally not be permitted to transfer its interest without the consent of the general partner of such fund. Furthermore, the transferability of an interest will be subject to certain restrictions contained in the governing documents of a closed-end fund and will be affected by restrictions imposed under applicable securities laws. The interests should only be acquired by investors able to commit their funds for an indefinite period of time, as the term of the closed-end fund could continue for over 14 years. In addition, there are very few situations in which an investor may withdraw from a private equity closed-end fund. The possibility of total loss of an investment in a fund exists and prospective investors should not invest unless they can readily bear such a loss.
Risk of Loss. There can be no assurance that the operations of a strategy will be profitable or that the strategy will be able to avoid losses or that cash from operations will be available for distribution to the limited partners. The possibility of partial or total loss of capital of the strategy exists, and prospective investors should not subscribe unless they can readily bear the consequences of a complete loss of their investment.
Leverage. The strategy may use leverage in its investment strategy. Leverage may take the form of loans for borrowed money or derivative securities and instruments that are inherently leveraged, including options, futures, forward contracts, swaps and repurchase agreements. The strategy may use leverage to acquire, directly or indirectly, new investments. The use of leverage by the strategy can substantially increase the market exposure (and market risk) to which the strategies’ investment portfolio may be subject.
Availability of Suitable Investments. The business of identifying and structuring investments of the types contemplated by the strategy is competitive and involves a high degree of uncertainty. Furthermore, the availability of investment opportunities generally will be subject to market conditions and competition from other groups as well as, in some cases, the prevailing regulatory or political climate. Interest rates, general levels of economic activity, the price of securities, and participation by other investors in the financial markets may affect the value and number of investments made by the strategy or considered for prospective investment.
Reliance on the General Partner and Investment Manager. The success of the strategy will be highly dependent on the financial and managerial expertise of a fund’s general partner and investment manager and their expertise in the relevant markets. The quality of results of the general partner and investment manager will depend on the quality of their personnel. There are risks that death, illness, disability, change in career or new employment of such personnel could adversely affect results of the strategy. The limited partners will not make decisions with respect to the acquisition, management, disposition or other realization of any investment, or other decisions regarding the strategies’ businesses and portfolio.
Market Risk. Private equity, as a form of equity capital, shares similar economic exposures as public equities. As such, investments in each can be expected to earn the equity risk premium, or compensation for assuming the non-diversifiable portion of equity risk. However, unlike public equity, private equity’s sensitivity to public markets is likely greatest during the late stages of the fund’s life because the level of equity markets around the time of portfolio company exits can negatively affect private equity realizations. Though private equity managers have the flexibility to potentially time portfolio company exits to complete transactions in more favorable market environments, there’s still the risk of capital loss from adverse financial conditions.
Credit Secondaries Investing Risks. Investments in secondary investments in underlying portfolio funds focusing primarily on senior secured credit investments include risks related to both secondary market transactions generally as well as risks specific to such credit investments will apply with respect to a portfolio. Secondary market transactions may impose higher costs than other investments and may require a portfolio to assume contingent liabilities associated with events occurring prior to the investment. The overall performance of an investment in an underlying portfolio fund acquired through a secondary transaction will depend in large part on the purchase price paid. In addition, the portfolio will generally not have any ability to negotiate terms with respect to interests in underlying portfolio funds acquired through secondary market transactions. Investments in senior secured credit investment portfolios through its underlying portfolio fund investments will expose a portfolio to credit risk, which is the risk that a borrower will be unable or unwilling to make principal and interest payments on its outstanding debt obligations when due. Adverse changes in the financial condition of a borrower and general economic conditions (or both) could impair the ability of a borrower to make payments on its senior debt and result in defaults on, and declines in, the value of such debt as well as, potentially, the collateral securing it. There is no assurance that such collateral will be sufficient to mitigate the losses incurred as a result of defaults.
“Professional Investor” under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) and its subsidiary legislation) means:
(a) any recognised exchange company, recognised clearing house, recognised exchange controller or recognised investor compensation company, or any person authorised to provide automated trading services under section 95(2) of the SFO;
(b) any intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong;
(c) any authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong;
(d) any insurer authorized under the Insurance Ordinance (Cap. 41 of the Laws of Hong Kong), or any other person carrying on insurance business and regulated under the law of any place outside Hong Kong;
(e) any scheme which-
(i) is a collective investment scheme authorised under section 104 of the SFO; or
(ii) is similarly constituted under the law of any place outside Hong Kong and, if it is regulated under the law of such place, is permitted to be operated under the law of such place,
or any person by whom any such scheme is operated;
(f) any registered scheme as defined in section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap. 485 of the Laws of Hong Kong), or its constituent fund as defined in section 2 of the Mandatory Provident Fund Schemes (General) Regulation (Cap. 485A of the Laws of Hong Kong), or any person who, in relation to any such registered scheme, is an approved trustee or service provider as defined in section 2(1) of that Ordinance or who is an investment manager of any such registered scheme or constituent fund;
(g) any scheme which-
(i) is a registered scheme as defined in section 2(1) of the Occupational Retirement Schemes Ordinance (Cap. 426 of the Laws of Hong Kong); or
(ii) is an offshore scheme as defined in section 2(1) of that Ordinance and, if it is regulated under the law of the place in which it is domiciled, is permitted to be operated under the law of such place,
or any person who, in relation to any such scheme, is an administrator as defined in section 2(1) of that Ordinance;
(h) any government (other than a municipal government authority), any institution which performs the functions of a central bank, or any multilateral agency;
(i) except for the purposes of Schedule 5 to the SFO, any corporation which is-
(i) a wholly owned subsidiary of-
(A) an intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong; or
(B) an authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong;
(ii) a holding company which holds all the issued share capital of-
(A) an intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong; or
(B) an authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong; or
(iii) any other wholly owned subsidiary of a holding company referred to in subparagraph (ii); or
(j) any person of a class which is prescribed by rules made under section 397 of the SFO for the purposes of this paragraph as within the meaning of this definition for the purposes of the provisions of the SFO, or to the extent that it is prescribed by rules so made as within the meaning of this definition for the purposes of any provision of the SFO.
The first of such classes of additional “professional investor”, under the Securities and Futures (Professional Investor) Rules (Cap. 571D of the Laws of Hong Kong), are:
(k) any trust corporation (registered under Part VIII of the Trustee Ordinance (Cap. 29 of the Laws of Hong Kong) or the equivalent overseas) having been entrusted under the trust or trusts of which it acts as a trustee with total assets of not less than HK$40 million or its equivalent in any foreign currency at the relevant date (see below) or-
(i) as stated in the most recent audited financial statement prepared-
(A) in respect of the trust corporation; and
(B) within 16 months before the relevant date;
(ii) as ascertained by referring to one or more audited financial statements, each being the most recent audited financial statement, prepared-
(A) in respect of the trust or any of the trust; and
(B) within 16 months before the relevant date; or
(iii) as ascertained by referring to one or more custodian (see below) statements issued to the trust corporation-
(A) in respect of the trust or any of the trusts; and
(B) within 12 months before the relevant date;
(l) any individual, either alone or with any of his associates (the spouse or any child) on a joint account, having a portfolio (see below) of not less than HK$8 million or its equivalent in any foreign currency at the relevant date or-
(i) as stated in a certificate issued by an auditor or a certified public accountant of the individual within 12 months before the relevant date; or
(ii) as ascertained by referring to one or more custodian statements issued to the individual (either alone or with the associate) within 12 months before the relevant date;
(m) any corporation or partnership having-
(i) a portfolio of not less than HK$8 million or its equivalent in any foreign currency; or
(ii) total assets of not less than HK$40 million or its equivalent in any foreign currency, at the relevant date, or as ascertained by referring to-
(iii) the most recent audited financial statement prepared-
(A) in respect of the corporation or partnership (as the case may be); and
(B) within 16 months before the relevant date; or
(iv) one or more custodian statements issued to the corporation or partnership (as the case may be) within 12 months before the relevant date; and
(n) any corporation the sole business of which is to hold investments and which at the relevant date is wholly owned by any one or more of the following persons-
(i) a trust corporation that falls within the description in paragraph (k);
(ii) an individual who, either alone or with any of his or her associates on a joint account, falls within the description in paragraph (k);
(iii) a corporation that falls within the description in paragraph (m);
(iv) a partnership that falls within the description in paragraph (m).
For the purposes of paragraphs (k) to (n) above:
An institutional investor as defined in Section 4A of the SFA and Securities and Futures (Classes of Investors) Regulations 2018 is:
(a) the Singapore Government;
(b) a statutory board as may be prescribed by regulations made under section 341 of the SFA, as prescribed in the Second Schedule of the Securities and Futures (Classes of Investors) Regulations 2018;
(c) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is —
(i) to manage its own funds;
(ii) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or
(iii) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country;
(d) any entity —
(i) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and
(ii) whose funds are managed by an entity mentioned in sub‑paragraph (c);
(e) a bank that is licensed under the Banking Act 1970;
(f) a merchant bank that is licensed under the Banking Act 1970;
(g) a finance company that is licensed under the Finance Companies Act 1967;
(h) a company or co‑operative society that is licensed under the Insurance Act 1966 to carry on insurance business in Singapore;
(i) a company licensed under the Trust Companies Act 2005;
(j) a holder of a capital markets services licence;
(k) an approved exchange;
(l) a recognised market operator;
(m) an approved clearing house;
(n) a recognised clearing house;
(o) a licensed trade repository;
(p) a licensed foreign trade repository;
(q) an approved holding company;
(r) a Depository as defined in section 81SF of the SFA;
(s) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere;
(t) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors;
(u) a designated market‑maker as defined in paragraph 1 of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations;
(v) a headquarters company or Finance and Treasury Centre which carries on a class of business involving fund management, where such business has been approved as a qualifying service in relation to that headquarters company or Finance and Treasury Centre under section 43D(2)(a) or 43E(2)(a) of the Income Tax Act 1947;
(w) a person who undertakes fund management activity (whether in Singapore or elsewhere) on behalf of not more than 30 qualified investors;
(x) a Service Company (as defined in regulation 2 of the Insurance (Lloyd’s Asia Scheme) Regulations) which carries on business as an agent of a member of Lloyd’s;
(y) a corporation the entire share capital of which is owned by an institutional investor or by persons all of whom are institutional investors;
(z) a partnership (other than a limited liability partnership within the meaning of the Limited Liability Partnerships Act 2005) in which each partner is an institutional investor.
An accredited investor as defined in Section 4A of the SFA and Securities and Futures (Classes of Investors) Regulations 2018 is:
(i) an individual —
(A) whose net personal assets exceed in value $2 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount;
(B) whose financial assets (net of any related liabilities) exceed in value $1 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount, where “financial asset” means —
(BA) a deposit as defined in section 4B of the Banking Act 1970;
(BB) an investment product as defined in section 2(1) of the Financial Advisers Act 2001; or
(BC) any other asset as may be prescribed by regulations made under section 341; or
(C) whose income in the preceding 12 months is not less than $300,000 (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount;
(ii) a corporation with net assets exceeding $10 million in value (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe, in place of the first amount, as determined by —
(A) the most recent audited balance sheet of the corporation; or
(B) where the corporation is not required to prepare audited accounts regularly, a balance sheet of the corporation certified by the corporation as giving a true and fair view of the state of affairs of the corporation as of the date of the balance sheet, which date must be within the preceding 12 months;
(iii) A trustee of a trust which all the beneficiaries are accredited investors; or
(iv) A trustee of a trust which the subject matter exceeds S$10 million; or
(v) An entity (other than a corporation) with net assets exceeding S$10 million (or its equivalent in a foreign currency) in value. “Entity” includes an unincorporated association, a partnership and the government of any state, but does not include a trust; or
(vi) A partnership (other than a limited liability partnership) in which every partner is an accredited investor; or
(vii) A corporation which the entire share capital is owned by one or more persons, all of whom are accredited investors.
Continuation solutions encompass a host of transaction types in which a GP secures interim liquidity and/or additional primary capital for their LPs in a strongly performing asset, or set of assets, that the GP will continue to own and control. Specifically, they include continuation funds, new funds created by GPs for the purpose of acquiring the asset(s) that continue to be managed by the same GP and capitalized by one or several secondary buyers, or equity recapitalizations involving a direct equity or structured equity investment into a portfolio company. These transactions can also include a parallel investment from the GP’s latest fund into that same pool of assets (a “cross-fund trade”).
