Investors looking for liquidity are expected to rapidly divest their positions in private credit funds this year, with a record-breaking $30 billion set to change hands in the burgeoning secondary market, according to JPMorgan Asset Management. This marks a significant increase from the modest $3 billion seen in 2019, as insurance and pension firms, eager to raise cash, seek to offload some of their stakes in illiquid funds. The surge in such transactions has driven robust activity in the secondary market, attracting major players like Apollo Global Management Inc. and JPMorgan to acquire these stakes.
Andrew Carter, overseeing JPMorgan’s credit secondaries strategy, highlighted that the current deal flow is primarily driven by liquidity needs arising from slowed cash flows due to decreased M&A and capital markets activity. Deal sizes have escalated from an average of $25 million to around $200 million.
While private credit investments are typically intended for long-term holding, some prominent lenders like Apollo, Ares Management, and Tikehau Capital have amassed substantial funds specifically for secondary deals. Pantheon Ventures, a key player in credit-secondaries, led a $1 billion deal in September and projected approximately $23 billion of private debt to be sold in the secondary market in the preceding year.
Pensions and insurance companies are more inclined to reconsider their exposure to private assets to manage liabilities or address new regulatory constraints. In contrast, sovereign wealth funds in the Middle East have been actively increasing their presence in private markets, according to data from Global SWF.
Carter noted a general trend where Europe is selling in the private credit market, while the Middle East is actively buying. In late 2023, sellers flooded the market, accepting discounts ranging from 10% to 15%, compared to approximately 8% to 12% in 2021.
