Navigating Market Volatility: The Surge in Private Credit Secondary Sales

April 14, 2025

As financial markets remain unsettled and liquidity becomes a growing concern, investors are increasingly turning to the secondary market to offload private credit holdings. This shift marks a notable development in a space historically known for its lack of liquidity and limited trading activity.

Private credit — direct lending provided by non-bank institutions — has grown into a $1.5 trillion market, favored for its attractive yields and consistent performance. But as public markets decline, institutional investors like pension funds and endowments are facing disproportionate private asset allocations in their portfolios — a phenomenon known as the “denominator effect.” This has triggered a wave of secondary selling, as investors rebalance and seek cash to meet obligations or reduce risk.

These secondary trades are occurring at modest discounts, typically between 5–10% below par. While such markdowns may seem minimal, they reflect a growing willingness to accept lower valuations in exchange for flexibility and liquidity.

Hedge funds, which often have tighter redemption timelines, are also participating in these sales. Though the activity doesn’t yet signal broad distress, it does highlight a shift in sentiment and a greater need for optionality among investors.

As more participants embrace the secondary market, private credit is gradually becoming more dynamic and accessible — a sign of the asset class’s continued evolution and growing sophistication.