From Scale to Sophistication: Navigating the Next Era of Private Credit Secondaries
The asset class is entering a new phase involving larger, more complex opportunities that are increasingly central to how investors manage risk and liquidity in an illiquid world.
Despite persistent macro headwinds from geopolitical flare-ups to valuation mismatches, we find that deal appetite remains surprisingly resilient. In fact, the second half of 2025 is shaping up to be more active than many expected, but with clear signs that execution challenges remain.
Most private credit managers focus on asset performance to drive alpha - selective underwriting, portfolio diversification, effective portfolio monitoring, and managing risk through cycles – as discussed in Part 1 and Part 2 of our “Creating Alpha” series. Asset performance is of course critical to adding value, but it is also table stakes. In the journey from fund formation to exit, Antares seeks to achieve a differentiated capability that benefits investors: an integrated, in-house structuring and financing capability that actively creates value throughout the lifecycle of a fund.
In the evolving landscape of private credit, one question looms large for advisors and allocators: Where should we play? While large-cap and upper middle market lending has historically attracted the lion’s share of capital among public non-traded BDCs—akin to investors’ early exposure to large-cap equities—there’s a growing realization that the core middle market may offer greater long-term value, diversification, and downside protection.
What started as a promising year with high hopes for robust deal activity has evolved into a more cautious environment, as economic uncertainty and shifting capital flows temper the pace of M&A activity. In this conversation with Antares Capital’s Chief Executive Officer, Timothy Lyne talks about the one thing the current climate reveals: the resilience—and rising relevance—of direct lenders.
We believe prospects look favorable for direct lending and liquid credit to generate attractive risk-adjusted returns in 2025. On the return side, absolute yields should be supported by “higher for longer” base rates, direct loan yield premiums remain attractive and spreads should stabilize and could potentially widen some if M&A new issue activity rebounds. On the risk side, credit trends should be generally constructive given declining interest rates and continued EBITDA growth, although default and loss will vary among lenders. Rising volatility should underscore direct lending’s appeal in providing portfolio return stability while offering investing opportunities in liquid credit markets.
Most borrowers forecast further improvement in company operating metrics, anticipating organic revenue, EBITDA and margins to continue to grow. Furthermore, hiring is expected to increase as the demand outlook remains favorable, but some borrowers note that labor availability and cost continue to pose a challenge to hiring. This supports our belief that a resilient labor market and strong consumer consumption will continue to drive healthy economic growth in 2025.