By Ed Goldstein, Partner, CIO of Coller Credit Secondaries, Coller Capital
Liquidity is increasingly top of mind in private markets, driven by the evolution of investor needs and the natural maturing of portfolios. In Australia, and globally, institutions are increasingly rethinking how they manage long-term commitments. Secondaries, once a niche corner of the market, is emerging as a strategic solution to some of the sector’s biggest structural challenges.
Secondaries provide a mechanism for investors to exit or reshape private market positions before the natural end of a fund’s life. In credit, this market is in its early stages, but the trajectory is similar to its private equity counterpart.
Globally, private credit has expanded rapidly over the past decade. From a niche asset class, it has grown into a $4 trillion market. I have witnessed this shift firsthand across the past 16 years as the market has developed. Today, it is a broad asset class, which while reaching its maturity, still continues to evolve.
The growth in private credit has been driven largely by middle-market direct lending strategies, particularly in the US and Europe, where private lenders stepped in as banks retreated following the Global Financial Crisis. These funds offered a compelling proposition which offered more tailored financing for borrowers and attractive risk-adjusted returns to investors.
As the primary market has scaled a secondary market has naturally emerged. As with private equity over 20 years ago, investors and managers are now looking to the secondary market as a liquidity tool.
Secondary markets inherently enable investors to trade positions in closed-end private funds, offering liquidity in what are otherwise long-term illiquid strategies. A typical use case might involve a superannuation fund that wants to rebalance its portfolio or respond to cashflow needs but is locked into a 10-year fund cycle.
Also read: ASIC’s Scrutiny Will Strengthen Private Credit
The rise of private credit secondaries is being driven by three key forces: education, scale, and timing. First, investors are increasingly aware of the secondary market’s role not just as a liquidity solution, but to reshape portfolios. With greater transparency, specialist buyers can look through to the underlying loans, assess credit risk, and provide fair pricing that reflects asset quality.
Second, the scale of the market has reached a tipping point. With trillions in private credit AUM and hundreds of billions in seasoned exposure, even a modest one per cent turnover rate can result in $40 – $50 billion of annual secondaries volume.
And third, the timing is right. Investors around the world, particularly those in markets like Australia are facing changing liquidity demands.
The buyers, in turn, are not just scooping up “diversification at a discount”, they’re underwriting risk-adjusted cash flows, often with a detailed look-through to individual loan positions. The transparency and diversification offered by credit secondaries can be valuable, particularly when portfolios include hundreds of underlying borrowers across fund managers, sectors, and regions. This rigour can create a more resilient return profile and helps narrow the range of outcomes for investors.
Let’s focus for a moment on the value of transparency in secondaries. In a primary fund, investors are largely backing the manager and their track record — despite thorough due diligence, there remains an element of uncertainty. In contrast, secondaries offer visibility into the underlying assets, enabling line-by-line forecasting and more precise outcome modelling. This is where an underwriting edge comes into play. Rather than relying solely on the manager’s watchlist, we construct our own, leveraging a granular view of asset performance. This approach allows Coller Capital to price risk with greater accuracy and selectively build resilient portfolios.
As private markets continue to grow, secondaries, both in equity and credit, are becoming a fundamental part of the ecosystem. They allow capital to move more efficiently, improve risk management, and offer entry points into mature portfolios for new investors.
Australia is well placed to benefit from this evolution. While much of the domestic private credit market [in the region] has historically focused on real estate and construction lending, we are seeing growing interest in sponsor-backed corporate credit mirroring trends in North America and Europe. Internationally, it’s a broad ecosystem, including corporate lending, infrastructure credit, asset-backed finance, and more esoteric and niche strategies. As these portfolios season, investor interest in secondary solutions is gaining pace.
This is not a short-term trend. It’s a structural shift in how private markets are accessed, managed, and evolve. For investors looking to participate in the next phase of private markets, secondaries are not just part of the solution; they’re becoming central to it.
