Listen to the latest episode of Credit Exchange with Lisa Lee
Published in London & New York
10 Queen Street Place, London
1345 Avenue of the Americas, New York
Creditflux is an
company
© Creditflux Ltd 2026. All rights reserved. Available by subscription only.
News
Private credit funds find their own version of a CLO reset
by Lisa Fu
The private credit fund secondaries market as a tool is not too dissimilar to the solution adopted by the CLO market, said Michael Schad, partner and the head of Coller Credit Secondaries. A CLO used to just run its course, then people started refinancing.
“They changed the financing package or they were resetting them, which meant they re-initiated the investment period of the CLO to keep it alive for longer,” Schad told host Lisa Lee on the Credit Exchange with Lisa Lee podcast in August. “That is exactly what’s happening in private credit now.”
The private credit secondaries market has seen a rush of activity in recent years, driven by general partner-led deals. These private credit general partners can recruit private credit secondaries investors like Coller to essentially reset the clock on an older vintage fund and present an early exit option for limited partners in the existing fund.
Typically, these GP-led private credit secondaries deals will see the manager create a continuation vehicle that buys the assets in an older, existing fund. Secondaries investors commit capital for a stake in the continuation vehicle. Meanwhile, LPs in the existing fund are given the option to continue their investment as an LP in this new continuation vehicle or get their money back as the old fund winds down. The continuation vehicle buys the assets from the existing fund, allowing the old fund to liquidate and pay back LPs that chose not to roll into the continuation vehicle. Meanwhile, the secondaries investors and old LPs joining the continuation vehicle get instant exposure to a portfolio of known private credit assets that will continue to mature.
Volatility for us as secondary investors is a very good thing
Michael Schad
Head of Credit
Coller Capital Credit
The solution is attractive for investors that have this liquidity option to get out, but it is also attractive for the manager, Schad said. They can continue to manage these existing loans, rejuvenate the portfolio and continue to collect management fees for longer.
The private credit secondaries market saw an 84% jump in deal volume from USD 10.9bn in 2024 to USD 20bn in 2025, according to a June private credit secondaries report from Apollo. That jump seemingly came out of nowhere as the compound annual growth rate from 2020 to 2024 stood at just 46%. “That technology was already there; it just needed to be adopted,” Schad said. The world of private equity has been using continuation vehicle technology and relying on a secondaries market for many years. Private credit as an asset class just needed its private funds to reach a certain level of maturity for its own dedicated secondaries market to crop up.
“What makes the asset class attractive for us at the moment is that you have a lot of noise around it… Whenever you have noise, that leads to more selling volume in our market,” Schad said. “So volatility for us as secondary investors is a very good thing.”
Such a shift in supply-demand dynamics may allow secondaries investors to buy into deals at a more attractive discount. The liquidity option created by a GP-led secondaries deal has become more valuable for private credit managers trying to please nervous LPs. Private equity-driven M&A and refinancings that allow direct lenders to exit credits have slowed as the clock on private credit fund lives keeps ticking.
Meanwhile, institutional investors are already facing a lack of liquidity from prolonged private equity fund investments and may want to shake up asset allocations by exiting some fund investments sooner rather than later.
Positioning oneself as a trusted counterparty that can provide liquidity at difficult times can result in attractive deals, particularly if there is a down cycle. As a secondaries investor, one might be able to find good deals at attractive but fair prices since liquidity naturally shrinks during a market shock, Schad said.
That being so, Schad cautions against chasing discounts. Buying non-performing assets or loans cheaply is “not a recipe for success”, he said. Asset quality matters and pricing can be difficult to generalise.
New entrants from both pureplay secondaries investors and credit managers continue to enter the market, but private credit secondaries come with pitfalls, Schad added. Investors need expertise in underwriting individual credits and navigating the private funds ecosystem.
“It’s a downside-only asset class, so it’s really about knowing how to mitigate risk, construct your portfolio and, I guess, having experience navigating cycles,” Schad said.
