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News Analysis
Buyers of private credit secondaries spy discounts
by Lisa Fu & Nicholas Morgan
Private credit fund managers are fretting over the US-Iran war and the impact of artificial intelligence on corporate borrowers. But their concerns spell potential opportunity for another set of market participants — investors keen on stakes in existing funds if the price is right.
The secondaries market has blossomed in the past few years. Buyers have raised capital, while a maturing private credit market has generated deal flow.
Until recently prices for fund stakes have remained high, discouraging secondaries investors. But as economic and geopolitical uncertainty spreads, market sources say discounts are beginning to show up.
“We are seeing a wide variety of discounts along with an increase in ‘deferrals’, which in a yielding portfolio are another way to achieve a discount,” said Greg Ciesielski, HarbourVest head of credit secondaries.
In a deferral, the seller may allow the buyer to pay part of the purchase price upfront and the rest later, for example 18 months post-closing. This sweetens the deal for a buyer, which sees it as a kind of seller-provided financing.
“This deferral option tends to come into the market when there is a bit of a supply-demand mismatch,” Ciesielski said. “They’re increasing, particularly in LP-led transactions.”
Range of options for buyers
Pierpaolo Casamento, head of private debt secondaries at Tikehau Capital, agreed that discounts and deferrals can take many forms. “Typically, you have a delay between the record date and closing of these transactions, which means that you as a buyer might be getting the benefits of distributions of cash yield or depreciation,” he said.
Pressure on secondaries pricing marks a trend reversal. LP-led private credit portfolio pricing rose from 72% of net asset value in 2022 to 91% in 2024 and 2025, according to a Jefferies Private Capital Advisory report from February.
Zohair Tariq, a managing director in the private capital advisory group at Raymond James, said buyers are becoming less willing to pay full prices for private credit portfolios because of uncertainty.
He said investors are especially concerned that the adoption of AI will undermine the business models of companies offering software as a service (SaaS), which have borrowed heavily from private credit firms. “I think that’s where you’re seeing secondaries investors taking an extremely cautious view,” said Tariq.
Corbin Capital’s deputy CIO of credit, John Cocke, said the days of paying par or even above par for direct lending portfolios may be over, as secondaries investors must be compensated for heightened risk.
Deferrals are increasing
Greg Ciesielski
Head of credit secondaries
HarbourVest
Cocke previously told Creditflux he is under no pressure to put capital to work. “I don’t think I’d pay 95 cents for anything [right now],” he said.
Any reduction in purchases by semi-liquid private credit funds, which are facing a decline in net inflows, may also weigh on prices. Prices had been driven up in part by individual investors piling into private credit funds and wanting immediate exposure, said Sara Stinnett, a partner at DLA Piper. These funds were in a rush to deploy the vast sums they had raised and found a ready outlet in private credit secondaries.
Many paid prices that would not make sense for traditional, closed-end drawdown funds with a dedicated secondaries investment strategy, according to Stinnett. This group of buyers may now pull back from the market, depressing prices.
“The fact that they are now looking at an outflow of capital rather than an inflow, I think you can expect them to be less active in the market ,” she said.
However, interest in selling secondary stakes remains strong. “We’re seeing flow in GP-leds, LP-leds and evergreen vehicles of all varieties seeking to re-optimise their portfolios,” said Ciesielski. “And those assets also get sold into the secondaries market.”
Ciesielski said an LP-led sale may not necessarily be due to a sudden deterioration in portfolio quality. “Flows can be driven by sentiment,” he said. “Right now, we think sentiment is outpacing fundamentals.”
Forced selling isn’t a factor
What is clear to market participants is that LP-led disposals of private credit secondaries do not represent forced selling. The investors looking to offload their stakes may simply be seeking to adjust portfolio allocations.
Such deals could flood the market if buyers do pull back, Ciesielski said. But although conditions are shifting in favour of buyers, Casamento said he has seen no dramatic price correction yet.
A number of credit secondaries deals are still being negotiated and may not close for a month or two, so will take time to show up in the pricing data, market sources said.
There is no guarantee that the current price erosion will continue. Investors thinking about offloading their stakes may decide to hold off rather than sell at a loss, said Tariq.
