Private market participants are increasingly turning to secondaries, continuation vehicles and evergreen structures to manage liquidity pressures as financing and operational sophistication are becoming central to the evolution of these strategies.
At the panel moderated by Ben Carter, vice president, Nomura, Michael Zornitta, principal at AlpInvest, described credit secondaries as “an exciting aspect for the market”, pointing to continued growth expectations as more private credit sponsors enter the space. He said the market has been driven in part by capital formation focused on return profiles, alongside the need to address liquidity pressures linked to slower distributions.
Zornitta added that buyers of secondaries have become increasingly comfortable with leverage in continuation vehicles and GP-led transactions, particularly where portfolios are diversified and underwriting is robust. However, he stressed that evergreen and semi-liquid structures create a far more dynamic portfolio management challenge than traditional closed-ended funds.
“Portfolio construction and management” becomes critical in these vehicles, he said, because managers must continuously monitor subscriptions, redemptions and valuations while balancing investor outcomes over time. He also said that evergreen structures are “highly operation-intensive”, often requiring larger and more operationally focused teams.
Nick Smith, managing director for private credit at the Alternative Investment Management Association (Aima), pointed out that research shows around 80% of private credit assets remain in closed-ended structures, but evergreen vehicles are increasingly being used to address portfolio management and liquidity challenges for institutional investors.
Liquidity management tools are essential in semi-liquid structures to avoid asset-liability mismatches, said Smith, advising against treating all evergreen products the same way.
Severina Kaeppeli, Luxembourg partner at law firm A&O Shearman, said expectation management remains one of the biggest challenges for evergreen and semi-liquid products. “It is important to be clear about what investors will get,” she said, stressing the need for transparency around liquidity terms, redemption timelines and investor rights.
Kaeppeli added that newer frameworks, such as Eltifs and LTAFs, provide managers with broader distribution opportunities but warned that access to a wider investor base also comes with greater governance and communication responsibilities.
Colin Stewart, senior legal counsel at Arcmont Asset Management, said leverage is playing an increasingly important role in continuation fund transactions. He noted that the use of ABLs and other leverage facilities can help support pricing and improve return profiles for both existing and incoming investors.
Stewart said the use of leverage in continuation vehicle transactions can help investors better underwrite and stress-test portfolios, while also giving existing LPs greater assurance around pricing outcomes.
Hazem Benlarbi, head of treasury and hedging strategy at HG Capital, said institutional investors, he said, are using the structures to manage exposure to traditionally closed-ended private market funds, while the wealth channel is opening private markets to a broader investor base through regulation, private banks and distribution platforms. Transparency and operational readiness are becoming important as managers scale evergreen offerings. “Managers’ track records are also becoming an important factor,” Benlarbi said, adding that firms must show how they manage liquidity, hedging, share classes and tracking error across growing investor bases.
