Private Equity

The secondary market for private equity remains robust, with strong activity in both LP-led transactions and GP-led deals. As buyer and seller expectations converge, the quality of LP portfolios and GP continuation vehicles offered via secondaries continues to improve, making this an appealing segment for discerning investors.

LP-Led Secondaries: Volume has surged as exit activity remains low and several PE fund vintages from 2007-2011 approach maturity walls. This trend is expected to continue, creating attractive opportunities to acquire assets at discounted valuations.

GP-Led Continuation Vehicles: The difficult exit environment is increasingly prompting GPs to utilize continuation vehicles to retain their best assets while providing liquidity for LPs wanting cash distributions from exits.

Private Credit

Private credit offers compelling potential returns, ranging from low double-digits to mid-teens, through a variety of specialty finance and structured credit solutions.

Specialty Finance: There is increasing interest in niche opportunities such as consumer credit card portfolio purchases, forward flow agreements (i.e., “lending to lenders”), and bank credit risk transfers. These transactions are providing attractive yields as banks seek to reduce regulatory capital charges.

Flexible Junior Capital: Demand is rising for flexible junior capital, which involves structuring payment terms with a mix of cash and PIK interest. These solutions offer mid-teens IRRs and can negotiate stronger financial and maintenance covenants, providing additional downside protection.

Asset-Backed Credit Solutions: There is a growing appetite for asset-backed lending, where companies pledge high-quality collateral—such as receivables, inventory, and certain fixed assets—to secure liquidity. This trend reflects a shift towards collateralized lending in a more cautious credit environment.

NAV Financing and Liquidity Solutions for PE Firms: There is increasing demand for NAV financing and other bespoke lending solutions tailored to private equity firms seeking to generate liquidity from their portfolios. These financing options can unlock capital without necessitating an asset sale.

Interestingly, while credit spreads for publicly traded corporate and high-yield debt remain tight, private credit funds report robust pipelines, suggesting significant divergence in borrower access to credit. This creates opportunities for private lenders to step in where traditional financing may be constrained.