Having argued last May that the private debt secondaries market had grown up, London-based placement and advisory specialist Ely Place Partners now maintains the market has “graduated to the mainstream”.

In its Private Debt Secondary Market Survey 2024, the firm acknowledges that “due to the number of deals that are completed on a bilateral basis and that close unreported and under the radar”, it is difficult to estimate the true size of the private debt secondaries market. However, the anecdotal evidence appears to suggest a strong upward trajectory.

Here are some of the key findings from the April survey.

Increasing volume

Ely Place says reported numbers suggest a market size of $5 billion-$6 billion of closed transactions in both 2022 and 2023. The consensus among respondents to the survey suggested that between $17 billion and $25 billion of dealflow had been seen over the last 12 months, with estimates of $6 billion-$10 billion of closed deals during the period.

Looking ahead, impressive growth appears to be in the works. Survey respondents said they expected more than $30 billion of dealflow during 2024, with closed transactions totalling $10 billion-$15 billion. This means the year may see an increase in volume of 50-100 percent. Moreover, one investor predicted $50 billion of volume by 2026.

Competition heats up

In its report last May, Ely Place found that credit secondaries were priced at mid-80s in terms of discount to net asset value on average, and that there was a huge range of pricing. Today, average pricing remains similar and some high quality senior loan portfolios have pushed up close to par pricing.

This reflects confidence which, in Ely Place’s view, is based on fewer concerns about losses than 12 months ago, an improvement in private debt fund liquidity, less uncertainty about the macro environment and an increase in buyside capital. Respondents to the survey said pricing had picked up 2-5 percent as a percentage of NAV from a year ago.

It’s not all red-hot competition, though. Other portfolios continue to trade at larger discounts depending on factors such as the stage in the fund term, expected refinancings, the underlying strategy, the quality of the loans, amount of leverage and who the GP is.

The survey points out that while there has been an uptick in pricing, the headline piece is dependent on timing between reference date and closing. It notes: “Two quarters or more of interest payments between the reference date and closing in favour of the buyer can make a big difference to the effective net price paid.”

Pension funds to the fore

The growing maturity of the market has produced a dedicated universe of buyers, giving LPs confidence to bring large portfolios to market. Because of this, respondents to the survey said they expected dealflow to be heavily weighted towards the LP side, with LP-led deals expected to account for 80 percent of the total versus 20 percent for GP-led transactions.

While various LPs are expected to comprise the seller universe, most pressure is on those with short-term cash needs. Pension funds was the category most cited by survey respondents, in particular those based in the UK. Family offices and endowments were also expected to put portfolios on the market.

While GP-leds are tipped to be only a relatively small proportion of the market, they are expected to grow as GPs “look for creative solutions to accelerate liquidity for their LPs and wrap up older funds”.

Andy Thomson is editor of affiliate title Private Debt Investor. Write to him at andy.t@pei.group