Secondaries Edge: The Rise of Capital Solutions Resets Valuation Makers

New trading venues, continuation funds and capital-solutions platforms are creating a parallel market that increasingly determines valuations, ownership and liquidity.

Price is Right?

Private credit’s rapid growth has created one of the world’s largest alternative asset classes, attracting trillions of dollars from pension funds, insurance companies and increasingly individual investors.

Now, a growing secondary market is raising an uncomfortable question:

If high-quality private-credit portfolios consistently trade at 94 percent to 98 percent of net asset value, should managers continue marking them at 99 percent or 100 percent?

For years, the issue was largely theoretical. Private loans rarely changed hands, giving investors little ability to compare reported valuations with actual market prices. Unlike public bonds or broadly syndicated loans, direct-lending assets were typically held until maturity, leaving managers and third-party valuation firms to determine fair value.

That dynamic is beginning to change.

A rapidly expanding secondary market for private credit is creating a stream of transactions that provide one of the first meaningful tests of how private loans are valued.

The issue is becoming particularly important as private-credit managers expand deeper into the wealth-management channel, where investors often assume reported NAVs closely approximate realizable value.

Recent market data suggests that many performing private-credit assets are changing hands at values below the amounts at which they are carried by fund managers. According to iCapital, direct-lending secondary transactions have recently traded between 94 percent and 98 percent of net asset value. In comparison, private-credit secondaries overall have averaged approximately 89 percent of NAV over the past five years.

Other market participants report even steeper discounts. Allianz Global Investors has said private-debt secondary transactions frequently involve double-digit discounts to NAV, often around 15 percent, reflecting liquidity constraints and execution considerations rather than deterioration in underlying credit quality. Valuation Research Corp. has similarly noted that private-credit fund secondary transactions often occur at discounts of 10 percent to 30 percent to reported NAV despite the underlying assets having undergone formal valuation reviews.

The figures do not necessarily mean managers are overstating portfolio values. Secondary buyers typically demand compensation for illiquidity, portfolio concentration, transaction complexity and the inability to immediately exit positions. Nevertheless, the discounts are creating a growing body of evidence against which investors can compare reported marks.

Separate data from Jefferies showed secondary portfolios across strategies were priced at roughly 89 percent of NAV in 2024.

The debate arrives at a critical moment for the industry.

Private-credit assets under management have swelled to roughly $1.6 trillion globally, fueled by demand for floating-rate income and growing allocations from wealth-management investors. The industry’s appeal has rested partly on stable returns and relatively low reported volatility.

Critics have long argued that the stability may reflect valuation practices as much as underlying economics.

Unlike public securities, private loans are not marked continuously by active markets. Managers instead rely on valuation models that incorporate company performance, comparable transactions and market conditions.

As long as assets were rarely traded, there was little way to challenge those assumptions.

The rise of credit secondaries is changing that.

Dedicated secondary funds have raised billions of dollars to purchase private-credit portfolios, while continuation vehicles, fund restructurings and portfolio sales are generating an expanding universe of pricing data.

The movement has found an unlikely champion in Apollo Global Management.

Chief Executive Marc Rowan has become one of the industry’s most vocal advocates for greater transparency and liquidity in private markets. Apollo has pushed for more frequent pricing mechanisms across private assets and has invested heavily in building secondary-market infrastructure through its capital solutions and secondary businesses.

First Take: For now, the discounts remain relatively modest compared with other private-market asset classes. Many high-quality direct-lending portfolios continue to trade in the mid-to-high 90s rather than at distressed levels.

Rollover Blues

The average limited partner rollover rate in continuation vehicle transactions has bumped up to 15 percent from 10 percent in 2025, according to Jefferies.

That low LP rollover rate highlights a growing disconnect between the original narrative surrounding GP-led secondaries and how transactions are playing out in practice.

CVs were initially marketed as a way to give existing investors flexibility. LPs could either cash out at a negotiated valuation or roll their interests into a new vehicle that would continue owning a prized portfolio company. In theory, the structure aligned the interests of managers and investors while extending ownership of high-performing assets.

In reality, most investors are choosing the exit door.

With only about 15 percent of LP capital rolling into CVs on average, sponsors are effectively sourcing an entirely new investor base for each transaction. Secondary buyers, sovereign wealth funds, pension plans and increasingly private-credit-backed financing providers are stepping in to fund the deals.

The trend reflects both supply and demand dynamics. Many institutional investors remain overallocated to private equity following years of weak distributions and slower-than-expected exits. Faced with liquidity pressures, LPs often prefer to monetize positions rather than recommit capital to an asset they have already owned for years.

At the same time, continuation funds have become a favored exit alternative for sponsors confronting a sluggish M&A and IPO market. Rather than selling a portfolio company to a strategic buyer or another private-equity firm, managers can transfer the asset into a new vehicle and retain control while generating liquidity for existing investors.

The result is a market that increasingly resembles a secondary buyout conducted within a sponsor’s own ecosystem.

The result is a market that increasingly resembles a secondary buyout conducted within a sponsor’s own ecosystem.

That evolution is drawing greater scrutiny from investors and industry groups. The Institutional Limited Partners Association has continued pushing for greater transparency and stronger governance standards around continuation vehicles, including clearer disclosure around conflicts of interest, valuation processes, fees and the options presented to existing LPs.

The guidance reflects growing LP concerns that sponsors may have incentives to retain trophy assets while resetting economics through new vehicles. ILPA and other investor advocates have argued that LPs need more visibility into transaction terms and more meaningful choice when deciding whether to sell or roll their interests.

Sponsors counter that rollover decisions are often driven by portfolio-management considerations rather than views on individual assets. Many institutions face allocation constraints, liquidity needs or governance hurdles that make participation difficult even when they remain optimistic about a company’s prospects.

Still, the data suggests continuation vehicles have become far more than a mechanism for LP choice. They are increasingly functioning as a transfer market in which sponsors refresh their investor base while extending ownership of selected assets.

Bottom Line: As GP-led secondaries continue their rapid growth, the 15 percent rollover figure offers a revealing snapshot of the market’s maturation. Continuation vehicles may still be marketed as optional liquidity events, but for most investors they have become something simpler: an exit.

BCI Reorg

British Columbia Investment Management Corp. is reshaping its private markets platform with the launch of a dedicated private capital solutions group, underscoring the growing demand among pension funds for more flexible investment structures and customized deployment strategies.

The new unit will sit within BCI’s private equity department, which oversees about $26 billion in assets and was initiated by the pension plan’s new PE chief Jon Salon. The move reflects a broader trend among large allocators seeking greater control over capital deployment as traditional private equity fund commitments face pressure from slower distributions, elevated valuations and a more competitive fundraising environment.

The private capital solutions group will focus on structuring and executing a range of investment opportunities, including co-investments, continuation vehicles, GP-led transactions, preferred equity investments and other bespoke private capital solutions. The team is expected to work closely with BCI’s existing private equity professionals while providing a dedicated platform to pursue complex transactions that do not fit neatly into traditional fund commitments.

The creation of the group comes as institutional investors increasingly look beyond conventional buyout funds to access private market exposure. Pension plans and sovereign wealth funds have expanded direct investing programs and become more active participants in secondaries, continuation vehicles and structured equity transactions as they seek greater flexibility and improved economics.

For BCI, the move also positions the organization to capitalize on a growing segment of the market. Private capital solutions strategies have gained traction as private equity sponsors search for liquidity alternatives amid a prolonged slowdown in exits. GP-led continuation vehicles, preferred equity financings and structured capital transactions have become increasingly common tools for sponsors seeking to hold prized assets longer while providing liquidity to existing investors.

Industry observers say large institutions are particularly well-suited to these opportunities because they can commit substantial amounts of capital, move quickly and maintain long-term investment horizons. Dedicated solutions teams also allow investors to evaluate transactions that may span multiple asset classes or require specialized structuring expertise.

The launch follows similar efforts by other major institutional investors and alternative asset managers that have established dedicated capital solutions platforms in recent years. What was once a niche corner of private markets has evolved into a mainstream investment category, attracting billions of dollars from investors seeking differentiated returns and more direct exposure to portfolio companies.

Bottom Line: As private equity firms continue to face pressure to generate liquidity and institutional investors search for new ways to put money to work, BCI’s new private capital solutions group highlights how the lines between traditional buyouts, secondaries and structured capital are increasingly blurring. For large investors, the ability to provide flexible capital may become as important as selecting the next top-performing fund manager.

Transactions

• Flexstone Partners has agreed to acquire Glouston Capital Partners, a Boston-based private equity secondaries manager with more than $3.4 billion in assets under management.
• Clearlake Capital completes its acquisition of secondaries firm Pathway Capital.
• Singapore sovereign wealth fund GIC is completing the sale of nearly $2.6 billion in private credit assets, Bloomberg reported.
• Stable Asset Management, a backer of hedge funds and other asset managers, is taking an ownership stake in private credit shop Kinnerton Hill Capital.
• Blue Owl (NYSE: OWL) opens Abu Dhabi office.
• Alliance Resource Partners to acquire about $200 million interests in AllDale Minerals funds

Fundraising

• Blue Owl (NYSE: OWL) led Veld Capital’s $405 million continuation vehicle, which was established to acquire a portfolio of European asset-backed finance assets. 
• Future Standard has closed PA Secondary Fund V, securing approximately $3 billion in commitments.
• Pantheon has raised $4.3 billion for its latest infrastructure secondaries vehicle, surpassing its initial $4 billion target.
• Partners Group says its real estate secondaries fund has raised $650 million toward a $1.5 billion target as it announces the first close of the fund.

Continuation Vehicles

• Neuberger Berman and Apollo S3 co-led Abry’s $780 million CV for Centauri Health Solutions, an Arizona-based healthcare technology company.
• Carlyle (NASDAQ: CG) closed a CV to retain its hold on Content Partners, a film distribution company.

People

• Richard Bonito, formerly a senior associate at Coller Capital, has joined TR Capital Group as a vice president.
• William Kreitler, formerly an associate director at Park Square Capital, has joined Warana Capital as a director.
• Nina Klein, formerly a senior operations associate at Forge, has joined Piper Sandler as a senior operations manager.
• Bella Sinclair, formerly financial reporting and tax manager at Uber Boat by Thames Clippers, has joined Coller Capital as a management accountant.
• Brian Miner, formerly a PE partner at Dechert law firm, has joined Paul Hastings in New York.

That’s the market in motion. Stay sharp and see you again soon. Until then, send tips, quips and tidbits to secondaries@themiddlemarket.