Jefferies: Credit Secondaries Market Surges as Continuation Vehicles Go Mainstream

What's New

The credit secondaries market is experiencing explosive growth, with transaction volumes surging from $6 billion in 2023 to an expected $17+ billion in 2025, representing a 70%+ compound annual growth rate. According to Jefferies' Private Capital Advisory, GP-led deals—particularly continuation vehicles—are driving this transformation, expected to account for more than 70% of transaction volume in 2025, a dramatic shift from the 38% GP-led share in 2024.

Why It Matters

This surge signals a fundamental shift in how private credit managers and investors approach liquidity, with continuation vehicles becoming the preferred solution for both general partners seeking capital and limited partners demanding flexible exit options. The market's maturation mirrors where private equity secondaries stood five years ago, suggesting sustained institutional adoption and growth potential.

Big Picture Drivers

• Liquidity Crunch: LPs increasingly seek exit solutions as traditional M&A and IPO routes remain sluggish, creating pent-up demand for alternative liquidity mechanisms

• Capital Influx: Dedicated secondary credit funds, insurance companies, and sovereign wealth funds are deploying significant capital with appropriate return expectations for direct lending strategies

• Blue-Chip Adoption: Major private credit managers are embracing continuation vehicles as comprehensive liquidity solutions, validating the strategy for broader market adoption

• Fundraising Pressures: Challenging fundraising conditions push GPs toward continuation vehicles to access dry powder while providing LPs optional liquidity events

• Regulatory Shifts: Tighter bank lending standards drive more activity into private credit markets, expanding the universe of assets available for secondary transactions

By The Numbers

• $20+ billion: Estimated dry powder from dedicated capital pools currently available in the market

• 95-100%: Pricing range for GP-led direct lending portfolio transactions, reflecting strong investor demand

• 65%: Share of 2024's $10 billion transaction volume attributed to direct lending strategies

• $160+ billion: Annual private equity secondaries volume, providing a roadmap for credit secondaries growth trajectory

• $40+ billion: Projected credit secondaries market size by 2027, representing massive expansion potential

Key Trends to Watch

• GP-led transactions are increasingly dominating market activity, with five deals exceeding $1 billion in the first half of 2025 alone.

• Pricing dynamics are improving significantly as dedicated capital sources can underwrite transactions at appropriate cost structures.

• Portfolio diversification is expanding beyond direct lending into opportunistic credit, mezzanine, and specialized strategies.

• Continuation vehicles are becoming programmatic tools rather than crisis-driven solutions for portfolio management.

The Wrap

The credit secondaries market has reached an inflection point where continuation vehicles represent the new normal rather than an emergency option. With substantial dry powder, improving pricing, and blue-chip manager adoption, this market appears positioned for sustained growth regardless of broader economic conditions. Investors who recognize this shift early stand to benefit from what Jefferies describes as a "perfect storm" of favorable conditions.