# How we can rebalance the private debt secondaries market
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-06-13
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: How to Rebalance the Private Debt Secondaries Market
Meta Description: Discover how a centralised marketplace could bridge the gap between demand and supply in the private debt secondaries market. Read now!
URL: https://financedigest.com/how-we-can-rebalance-the-private-debt-secondaries-markethtml

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# **How we can rebalance the private debt secondaries market**

_![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/39-1736813885357-compressed.jpg)_

_By **Christoph Gugelmann,** Founder & CEO of_ [_Tradeteq_](https://www.tradeteq.com/)

Superficially, the private debt secondaries market seems to be in good health. Trade volumes in second-hand stakes of private debt reached $17 billion in 2022 – thirty times larger than they were in 2012. [\[i\]](#_edn1) Yet, there exists a widening gap between the robust demand for deals and withering supply of capital to service them. The answer? A centralised marketplace for participants in the private debt secondaries market.

There exist a number of explanations for the [growth of the private debt secondaries market](https://www.financedigest.com/the-seasonings-spices-market-to-witness-steadfast-growth.html "The Seasonings Spices Market To Witness Steadfast Growth"). First, new financial regulations put in place after the 2008 financial crisis have made [public](https://www.financedigest.com/westminster-city-council-and-4c-launch-joint-venture-to-help-public-sector-organisations-address-financial-squeeze.html "Westminster City Council and 4C launch joint venture to help public sector organisations address financial squeeze") credit harder to access, driving firms to private credit as an alternate means to fund projects, mergers, and acquisitions. [\[ii\]](#_edn2) Second, the era of low interest rates – which has only recently ended – has made private debt an attractive investment for over a decade. Even the sudden end of this era last year has done little to dampen interest, as this asset class has proven not as vulnerable to the vicissitudes of inflation, [interest rate](https://www.financedigest.com/a-tale-of-two-central-banks-what-the-latest-interest-rate-decisions-mean-for-investors.html "A tale of two central banks – what the latest interest rate decisions mean for investors") rises, and the effects of the war in Ukraine. [\[iii\]](#_edn3) The demand for private credit has, in turn, created a healthy secondaries market, where the debts themselves are bought and sold.

**Not a drop to drink**

In practice, the [growth of this alternative asset is being held back by one major](https://www.financedigest.com/growth-street-announces-major-new-hires.html "Growth Street announces major new hires") problem. For years now, the market has [struggled to attract enough liquidity to service this growing demand](https://www.financedigest.com/global-factories-struggle-for-momentum-amid-patchy-demand.html "Global factories struggle for momentum amid patchy demand"). There is a lack of capital relative to the volume of deals being made; it has been claimed by the private equity house Coller Capital that “dry powder held by buyers of private debt secondaries is only about half of the annual deal volume.” [\[iv\]](#_edn4) Recently, a number of financiers have stepped up to the plate to try to bridge the gap: in March of this year, Mubadala and Ares Management launched a joint venture to invest in the secondaries market. [\[v\]](#_edn5) This was followed closely by Pantheon Ventures, which announced a new tranche of investment in this asset class in May. [\[vi\]](#_edn6) But overall, the story is one of arrested development – and the imbalance remains. Ed Goldstein, chief investment officer for Coller [Capital’s credit secondaries business](https://www.financedigest.com/xero-expands-capital-and-credit-sources-to-uk-business.html "Xero expands capital and credit sources to UK Business"), spoke for many when he described the market as still “very immature”. [\[vii\]](#_edn7)

**Growing pains**

There are a number of reasons why liquidity has not proven forthcoming. For one, there is a problem with information flow. Private credit is – by definition – not cleared on any kind of central exchange, and instead takes the form of a direct relationship between [borrower and lender](https://www.financedigest.com/uk-lenders-trial-government-backed-loans-for-risky-borrowers.html "UK lenders trial government-backed loans for risky borrowers"). This makes the market more opaque than others. It is often too expensive and time-consuming for [smaller borrowers and lenders to carry out the due](https://www.financedigest.com/smaller-smes-face-failure-due-to-cashflow-barriers.html "Smaller SMEs face failure due to cashflow barriers") diligence necessary to trade in this market with confidence. The knock-on effect of this will, of course, [affect volumes in the secondaries market](https://www.financedigest.com/trump-impeachment-odds-how-could-a-trump-impeachment-affect-the-market.html "Trump impeachment odds –how could a trump impeachment affect the market?"). Another reason is reputation: the [asset is still unfairly viewed by many fund](https://www.financedigest.com/taas-the-first-ever-tokenized-closed-end-fund-dedicated-to-blockchain-assets-partners-with-exchange-platforms.html "TaaS, the First-Ever Tokenized, Closed-End Fund Dedicated to Blockchain Assets, Partners With Exchange Platforms") and wealth managers as an obscure one; a desperate recourse for cash-strapped borrowers. [\[viii\]](#_edn8) As we have seen, this is a highly outdated view – yet it persists. Indeed, the secondaries [market largely relies on specialised brokers to spread the word about available investments](https://www.financedigest.com/foodies-who-love-farmers-markets-look-to-lime-tree-court-for-investment-in-property.html "Foodies Who Love Farmers’ Markets Look To Lime Tree Court For Investment In Property").

**Modernising the secondaries market through technology**

To advance any further, the private debt secondaries market will have to [close the gap](https://www.financedigest.com/iris-set-to-close-uk-digital-gap.html "IRIS set to close UK digital gap") between demand and supply. To do so, it must become more open, transparent, and rationalised. This will do much to [attract the liquidity that the market](https://www.financedigest.com/despite-concerns-over-brexit-uk-rated-as-most-attractive-commercial-real-estate-market.html "Despite concerns over Brexit, UK rated as most attractive commercial real estate market") needs. Tradeteq is on a mission to achieve this through technology.

Tradeteq provides a centralised online dashboard and marketplace for participants in the private debt secondaries market. It allows users to broadcast their [offers to the marketplace](https://www.financedigest.com/multilocal-launches-low-carbon-marketplace-globally-to-bolster-sustainability-offering.html "Multilocal Launches Low Carbon Marketplace Globally To Bolster Sustainability Offering"), track negotiations with buyers and sellers, analyse their portfolios, and to automate legal documentation and asset selection. Moreover, Tradeteq can [offer a number of services to market](https://www.financedigest.com/world-shares-rally-as-china-offers-markets-a-hand.html "World shares rally as China offers markets a hand") actors, such as introductions to investors, guidance on market positioning, and operational support. Tradeteq’s [digital platform](https://www.financedigest.com/raiffeisen-chooses-igtb-to-provide-digital-trade-finance-platform.html "Raiffeisen chooses iGTB to provide digital trade finance platform") aims to reduce cost and complexity, opening up the market to a greater number of participants.

In an era of economic uncertainty, private debt and its secondaries [market is proving to be a safe harbour for many firms](https://www.financedigest.com/transfer-firm-moves-into-polish-markets-with-the-unbanked-in-mind.html "Transfer Firm Moves Into Polish Markets With The Unbanked In Mind") and funds. It now just needs a technological jolt in the arm to [reach its full potential](https://www.financedigest.com/businesses-are-not-reaching-full-e-commerce-potential.html "Businesses Are Not Reaching Full E-commerce Potential").

To find out more about Tradeteq and book a software demo, please visit [our website.](https://www.tradeteq.com/)

[\[i\]](#_ednref1) [Why secondaries are in the spotlight (privatedebtinvestor.com)](https://www.privatedebtinvestor.com/why-secondaries-are-in-the-spotlight/)

[\[ii\]](#_ednref2) [Private Credit: Evolution and Opportunity in Direct Lending – Insights & education – BlackRock](https://www.blackrock.com/institutions/en-zz/insights/private-credit-evolution-and-opportunity-in-direct-lending)

[\[iii\]](#_ednref3) [Private credit – from niche to mainstream? (mandg.com)](https://www.mandg.com/investments/institutional/en-gb/insights/2023/q1/private-credit-from-niche-to-mainstream)

[\[iv\]](#_ednref4) [Private debt secondaries flooding the market overwhelm limited capital \| PitchBook](https://pitchbook.com/news/articles/private-debt-secondaries-market-2023)

[\[v\]](#_ednref5) [Mubadala and Ares form joint venture to invest in secondary private credit market deals (thenationalnews.com)](https://www.thenationalnews.com/business/2023/03/22/mubadala-and-ares-form-joint-venture-to-invest-in-secondary-private-credit-market-deals/)

[\[vi\]](#_ednref6) Pantheon hits $3bn for credit secondaries as latest program tops target \| Business Wire

[\[vii\]](#_ednref7) [Private debt secondaries flooding the market overwhelm limited capital \| PitchBook](https://pitchbook.com/news/articles/private-debt-secondaries-market-2023)

[\[viii\]](#_ednref8) [PDI\_May\_2023\_Coller\_Capital\_credit\_secondaries\_Q\_A.pdf (pardot.com)](https://storage.pardot.com/401212/16826785209yT6eYsn/PDI_May_2023_Coller_Capital_credit_secondaries_Q_A.pdf)


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