Private credit: the next frontier
GP-led continuation vehicles in private credit represent one of the most significant growth opportunities in secondaries. The market is at an early inflection point: capital formation, GP awareness, and intermediation infrastructure are all building simultaneously.
The credit model differs fundamentally from equity. Rather than single-asset vehicles, credit continuation funds are best suited to a portfolio-level structure, executed around year four or five of a fund’s life — at the end of the investment period, when the portfolio remains diversified and performing. Investors are offered the choice to exit or remain. Parallels with CLO refinancings, resets, and the growth of BDCs, suggest that periodic liquidity solutions could, over time, become the standard operating model for private credit managers.
The competitive dynamics could accelerate adoption rapidly. Once one GP in a peer group successfully executes a credit continuation fund, the DPI comparison with those who have not becomes stark. Transaction sizes are typically multi-billion, and capital formation remains the primary constraint, but given the structural forces at play, the direction of travel is clear.
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So mechanically, a credit continuation vehicle, an equity continuation vehicle, are somewhat similar.
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In both cases, you have assets being sold out of one fund into another, you have a new GP commitment and new incentives, same secondary type LP structure.
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The main difference is really on what goes into those vehicles.
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So in equity, one of the most common forms of CVs today is a single asset deal, where you’re sort of riding the upside.
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In credit because it only has downside, the goal of creating a successful continuation vehicle credit is diversification.
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So typically you’ll see a whole fund solution in credit, whereas in equity, it could be one or a handful of assets.
