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Diversifying at a Discount: Private Credit Secondaries

Private credit secondaries carry embedded structural benefits that may positively impact risk-return profiles.

Private Credit Secondaries Pricing
As % of NAV

Private Credit Secondaries May Provide:
  • Access to consistent and substantive discounts to net asset value (NAV)
  • A lower risk profile with seasoned, performing loans and lower leverage
  • Shorter average duration (2-4 years) vs. comparable direct lending funds
  • Diversification across GPs, vintages, managers, industries, and geographies

Source: Greenhill H1 2024 Global Secondary Market Review.

Private credit secondaries refers to the buying and selling of existing private debt fund interests or loan exposures on the secondary market, allowing investors to gain liquidity or enter investments without committing to new originations.

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Private market index providers rely on voluntary performance reporting by funds. This means that underperforming funds may delay reporting or, in some cases, not report at all. Additionally, poorly performing funds might liquidate, which further skews the results. As a result, private market indices may reflect a bias towards funds with successful track records, leading to the appearance that historical average fund performance is higher than it actually is.  It’s critical for investors to be aware of survivorship bias when assessing historical performance. Understanding this bias can help make more informed decisions when evaluating current private market investments.

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