$10T in private credit depends on liquidity infrastructure

Private credit is entering its third evolutionary phase—the transition from scale to liquidity—and it will determine the next decade's winners and losers.

Pantheon closes $5.2B for credit secondaries. Coller Capital acquires a $1.6B direct lending portfolio, followed by a $2.4B secondaries vehicle. Apollo explores a trading platform.

For the $3T private credit sector to continue its growth trajectory, it needs more than just capital and origination. 

It needs a new infrastructure of secondaries that can drive appropriate liquidity.

The Three Market Phases of Private Credit

I'm indebted to Van Spina's exceptional piece chronicling the history of private credit, which provides context for much of the argument below. It’s a great read. 

In the 1970s, Michael Milken at Drexel found value in "junk" bonds. After Drexel's collapse, banking regulations pushed traditional lenders away from middle-market lending.

Private credit stepped in. And evolved through distinct phases:

Phase 1: Growth (1990-2013)

• Capital was the currency
• Banks retreated under Basel and HLT guidelines
• Relationships drove deal flow
• Excel and manual processes were sufficient
• Winners: First movers with banking DNA

The focus was proving the model—demonstrating that private credit could deliver returns while serving borrowers banks had abandoned.

Phase 2: Scale (2013-2023)

• Size became the advantage
• The 2013 Leveraged Lending Guidance accelerated bank retreat
• Institutional capital flooded in
• $5B+ vehicles became common
• Winners: Those who deployed efficiently at scale

This phase transformed private credit from niche strategy to mainstream asset class. The largest managers grew from $10B to $100B+ in credit assets.

Phase 3: Liquidity (Emerging Now)

• Data architecture becomes the competitive edge
• Portfolio optimization demands secondary transfer capabilities
• Market volatility accelerates the need for exit options
• Traditional systems can't support even basic secondary transactions
• Winners: Those who combine origination strength with liquidity solutions

Why Liquidity Matters for Private Credit

Secondary market development isn't just a nice-to-have. It's fundamental to the market's future for four reasons:

1. Scale limitations: Without ways to exit, even the largest LPs will hit allocation ceilings.
2. Portfolio management: Investors need rebalancing capabilities to optimize across asset classes.
3. Retention of illiquidity premium: Structured, negotiated transactions won't eliminate premiums—they'll create better pricing discovery.
4. New investor comfort: Defined exit pathways will encourage new allocators to enter the market.

Private credit will never mimic public bonds with anonymous, continuous trading. 

It's about creating appropriate liquidity mechanisms for a private market—more structured, less relationship-driven, and scaled to fit investor needs.

The Infrastructure Gap

The emergence of liquidity mechanisms is creating an infrastructure gap worth billions.

Software systems built for origination and portfolio management can't support the varied necessities of secondary trading.

The market needs new capabilities:

• Transaction platforms that handle negotiated transfers with appropriate documentation
• Data standardization that enables portfolio-level analysis across funds and strategies
• Risk monitoring tools that provide actual transparency into underlying credit quality
• Regulatory reporting systems that accommodate secondary transactions

This isn't about recreating public market infrastructure. 

It's about building appropriate technology for private credit's unique needs—a tech stack that could unlock the pathway from $2T to $10T+ in market size.

Why Liquidity Doesn't Kill the Premium

The pushback is predictable: "Trading kills the illiquidity premium."

But this misunderstands market evolution. Private credit will never mirror public markets. That's not the goal.

Phase 3 liquidity is about structured, negotiated transactions—often driven by allocation needs, not panic.

A functioning secondary market strengthens private credit by:

• Enabling portfolio rebalancing without forced holds
• Facilitating price discovery without perfect transparency
• Allowing capital to recycle
• Providing confidence for new entrants

The goal isn't turning private credit into broadly syndicated loans. 

It's building infrastructure that maintains private credit's advantages, drives standardization and  adds strategic flexibility.

Four Clear Strategic Imperatives

The shift to Phase 3 creates 4 strategic priorities:

1. Information advantage trumps capital advantage

The firms that see risk clearly across complex portfolios will define the next cycle.

This requires integrated analytics that connect market dynamics to portfolio risk awareness and decision-making—a capability many firms still lack.

2. Secondary capabilities are no longer optional

Without them, you're playing in Phase 2 while the market moves to Phase 3.

Secondary market capabilities aren't just about exits. They're strategic tools that improve overall portfolio construction.

3. Technology infrastructure determines scalability

Capital is abundant. The constraint is now operational.

Building systems that work across strategies while meeting regulatory requirements isn't a nice-to-have. It's existential.

4. Institutional allocation processes are changing

As the market evolves, so must the governance and approval processes that drive capital flows.

Firms that reshape these frameworks will capture disproportionate allocations. And those frameworks rely on effective data management. 

Building the Private Credit Tech Stack

On June 17 in NYC, the Private Credit Tech Summit will convene the technologists and operators reengineering the infrastructure of private credit.

Our focus is exactly the argument above: how to build the standards, data architectures and software solutions that can scale private credit beyond $10 trillion. 

See the event here.

Thank you to Percent and DLA Piper for their partnership.

The central question: which firms are building the infrastructure for private credit's next era?

Because every functioning market relies on liquidity—of the right kind, at the right pace, with the right controls.

Today’s private credit opportunity isn't launching another fund. 

It's building the systems that enable the exchange and liquidity the market demands.

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