Credit secondaries’ growth may lie within the asset, cashflow divide

The growth of private debt’s secondaries market has been rapid, mirroring to an extent its private equity equivalent. But greater specialisation may become a differentiating feature.

By Andy Thomson

Credit secondaries has been a slow burn. As far back as 20 years ago, some private equity secondaries strategies included random bits and pieces of debt exposure – entirely in keeping with the nascent development of the primary private debt market at that time.

It’s impossible to cite an exact point the market matured, but it was around five years ago that some of the long-established big beasts of private equity secondaries began raising dedicated credit vehicles. Last week’s announcement by Allianz Global Investors that it had closed its debut private debt secondaries fund on €1.5 billion was a reminder both of LP appetite for the strategy – AllianzGI had a €500 million initial target – and that competition continues to increase.

Following the example of private equity (but with something of an accelerated timeframe) private debt’s secondaries market has evolved from a solid foundation of LP-led transactions to a growing proportion of innovative GP-led deals. There has even been some dabbling with continuation vehicles, as per Coller Capital’s $1.6 billion CV for Abry Partners’ Abry Advanced Securities Fund III in August last year (claimed by Coller to be the largest CV of its kind).

But while there will continue to be similarities between private equity and private debt secondaries markets, there will also be differences – relating mainly to the broader diversity of assets underlying private debt deals.

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