Toissijaisten markkinoiden tila

[Rory] Hello, and welcome to the State of Secondaries, a webcast series from Nasdaq Fund Secondaries. I'm Rory Maben, and I lead the institutional side of our team here at Nasdaq. In this series, we sit down with leaders across private markets to discuss key themes shaping today's landscape. And today we're joined by Olga Kosters, Managing Director of Liquidity Solutions and the Head of Credit Secondaries at Antares Capital, to discuss the recent growth of private credit within the secondaries market. Welcome, Olga.

[Olga] Thank you for having me, Rory. Nice to be here.

[Rory] It's so great to have you with us. In today's conversation, we'll focus on the evolution and acceleration of the credit secondaries market, the rise of GP-led credit secondaries. We'll consider the influence of current financial conditions on market trends, and we'll assess the key factors and risks that will likely determine the credit continuation vehicle performance in the coming 12 to 24 months. We'll start with a little bit of context-setting. So private credit secondaries has moved from a niche strategy to rapidly growing segment of the secondary market. From your perspective, what structural shifts have driven the acceleration, and how has the market growth influenced your personal involvement in this space?

[Olga] I've been an investor for more than 26 years now, and the last six-plus years, I focused on credit secondaries. When I got seed capital in 2019 and launched my first credit secondaries fund, back then, the first question that investors would ask, "Is there a market?" And now, of course, nobody is asking that question. So based on some of the stat from the brokers, the last year volume of closed deals in the market was about 20 billion, so the market has grown quite a bit. And I think it's entering in a very interesting stage right now. It's after this accelerated stage of growth, the market is maturing, bringing more institutional investors. And what's interesting is the trends that got us here and what's going to happen from now on. So the trends that got us here were, well, first of all, the private credit has grown quite a bit. So now it stands at around 1.5 to 2 trillion. And it's a very illiquid asset class, so people are searching for liquidity, it's natural, and that's a tailwind for credit secondaries. And then on the other side, credit secondaries are following in the footsteps of private equity secondaries market, where there was a development of legal framework, legal blueprint. In a way, credit secondaries are following and adopting some of those legal tools that were developed on the private equity side. This is what brought us here. In terms of how it's going to evolve from here, I think in my opinion, successful credit investors, credit secondaries investors, need two things. They need experienced teams with very sophisticated credit underwriting. And then on the other side, they need deep pools of capital. So when this opportunity to join Antares presented itself one and a half years ago, I thought it was very interesting. Antares has more than 30 years of underwriting credit and private markets, so it has a really strong backbone of underwriting. And also, they're very strong partners with CPP Investments. A very well-capitalized and sophisticated investor in its own right. So I think those two are making a very good basis for successful credit secondaries investments.

[Rory] Yeah, I think that makes a lot of sense and obviously this is a great space to be in today and we'll continue to kind of focus on the evolution first and then we'll talk a little bit more about the current context. From your perspective, how does the evolution of private credit create the conditions for growing interest from investors? And why is credit such a compelling area within secondaries?

[Olga] Rory, I think investors have been interested in credit secondaries since I had those conversations. And the reason is twofold. In very stable environment, credit secondaries provide diversification, provide very stable basis for income and provide a very good lens on underwriting existing portfolios and assets. And in more volatile markets, this liquidity premium can be harvested. So in stable markets, investors get stable income, and in volatile markets, they potentially get an upside from liquidity harvesting. stable income, and in volatile markets, they potentially get an upside from liquidity harvesting. Because when liquidity phase turns into higher price for liquidity, I think this provides credit investors with a cushion for protecting capital and potential outperformance.

[Rory] Yeah. That makes a lot of sense. And if we focus on kind of different segments of the secondary market, let's take a look at GP-led credit secondaries. So we're seeing a rise in GP-led credit continuation vehicles. So for example, your recently announced deal with Ares. Can we talk a little bit more about what created the conditions for more GP-led CVs in this space? kind of different segments of the secondary market, let's take a look at GP-led credit secondaries. So we're seeing a rise in GP-led credit continuation vehicles. So for example, your recently announced deal with Ares. Can we talk a little bit more about what created the conditions for more GP-led CVs in this space?

[Olga] I think the market has become more institutionalized over the years. So GP-leds, GP stand for general partners, are leading the deals, and those continuation vehicles, essentially new funds that are being formed, where a portfolio of assets is used as a seed to move into those funds. And in the last several years, GP-leds took a lion's share of all the credit secondaries markets. So why has it happened? On the one hand, there was a lot of capital formation. So again, a lot of institutional investors coming into the market, a lot of capital provided for potential continuation vehicles and deals. And from a GP perspective, they don't want to launch a deal unless they have a relatively good view on depth of the market. And they really want to ensure that the deal is going to be successful. So that was one factor. The other factors were more so with, again, going back to maturity, there is a very large interest in credit secondaries, and that drives brokers' interest. So they really try to be more active, and CVs can answer different needs and provide different solutions. Some GPs want to provide liquidity for the LPs. Some GPs want to enhance the momentum in fundraising. Some of them are looking to merge several subscale funds into a bigger fund. So all of those needs can be tailored. And brokers have developed a very kind of active engagement with various GPs. And the last but not least, I would say to your point, you mentioned the deal with Ares. There was a number of blue-chip, very well-respected GPs coming to the market. So I think it's a very big factor for other GPs following the trend. And it's proven to be a very successful deal-making environment. So I think that from that perspective, that sort of paved the way for more GP-leds to be done in the future.

[Rory] Joo, se kuulostaa järkevältä. Ja kosketit monia asioita. Puhumme ekosysteemistä lisää muutaman minuutin kuluttua, mutta haluamme todella keskittyä päivän sanaan LP:ille, joka on yhtenäisyys, eikö? Joten kun ajattelet tämän tyyppisiä luottosopimuksia GP-vetoisissa järjestelyissä, kuinka tärkeää on omaisuuserien valinta ja rakenteelliset elementit, kun pyritään saavuttamaan tuloksia transaktioissa? Ja miten tämä valinnaisuus muuttaa kaupan dynamiikkaa verrattuna perinteiseen LP-vetoiseen toissijaiseen?[Rory] Yeah, that makes a lot of sense. And you touched on a number of things. We'll talk more about the ecosystem in a few minutes, but want to really focus on kind of the word of the day for LPs, which is alignment, right? So when you're thinking about these types of deals in credit GP-leds, how important are asset selection and kind of structural elements when it comes to driving outcomes in the transactions? And how does that optionality sort of change the deal dynamics as opposed to a traditional LP-led secondary?

[Olga] So I started my career as an analyst within the private equity team, financial institutions group. So what we were doing, we were essentially doing what I'm doing now but in a different context. So we were looking at banks, both assets and liabilities, and trying to figure out how much we were going to pay for stakes in those banks. So fast-forward to now, every GP-led deal and actually LP-led deals, so includes two specific aspects of an underwriting. So on the one hand, we're very keen on understanding what the asset side is like, so the left side of the balance sheet. On the other side, we do want to understand what the structure looks like on the right side of the balance sheet. What you pointed to is very important. Do we have an optionality to select assets? Do we have this optionality to construct the portfolio? And if not, how we can price the assets that we're presented with. Right? So this is a very deep underwriting due diligence process on the asset side. The liability side is just as important, and that's back to your question on the structuring elements. Because if the liability side does not match what we have on the asset, that may create suboptimal performance for the vehicle overall. So I think in our due diligence process, we'll look at both. And I think that's how we drive the conviction. And for some of the high-conviction deals, both left side and right side have to work. So we've talked a little bit about the participants in the market, both the GPs and the LPs, which are the direct relationship, as well as the secondary buyers. How do kind of the interrelationships, how do relationships at their core really drive the reshaping of the credit secondaries ecosystem? Historically, fund of funds were leading the drive for secondaries, and that was very common sense, right? They had a lot of investments and funds. They had an information flow for funds. They have relationship with limited partners and GPs, LPs and GPs, so they were in a very good position to drive the growth in traditional LP-led credit secondaries. Yeah. What has happened since then is that GPs like Antares have figured that they can also underwrite not just the funds but also line-by-line assets within those funds, and that plays to their strengths. So in that regard, people like Antares and other GPs who entered the market, they're focused on underwriting, and they do have relationships that they formed across different market participants, maybe not as an LP, but they do have a wide network of relationships that they formed over three decades of being in the business. So I think both underwriting and relationship aspects work What's important for general partners who are considering launching the CV is that their information is protected. So what we have done, and many other market participants have done, we've created a wall. So we've created Antares Liquidity Solutions business as a standalone business, and we protect the information we receive from leaking outside of our team, of our group, our business. This is table stakes for credit secondaries, private equity secondaries. This is not something we invented, but we understand how important it is to protect the information. And hence, we spend a lot of time and attention building the wall so that we can answer this question and not jeopardize our reputation or our business.

[Rory] Sure. Yeah, that makes a lot of sense.

[Olga] And again, really protecting the integrity of those relationships.

[Rory] Joten käännetään katseemme siihen, mitä nykyisillä markkinoilla tapahtuu. Viimeisten kuuden kuukauden aikana on puhuttu paljon luotosta private equity -sijoituksissa. Joten miten nykyiset markkinaolosuhteet, sinun näkökulmastasi, todella vaikuttavat luotto-omaisuuserien tyyppeihin, joita tuodaan sekundaarimarkkinoille, ja siihen, miten nämä kaupat on rakennettu? Nykyisillä markkinoilla on puhuttu paljon luotosta private equity -sijoituksissa viimeisten kuuden kuukauden aikana. Joten miten nykyiset markkinaolosuhteet, sinun näkökulmastasi, todella vaikuttavat luotto-omaisuuserien tyyppeihin, joita tuodaan sekundaarimarkkinoille, ja siihen, miten nämä kaupat on rakennettu?[Rory] So let's kind of turn our focus to what's happening in the current market. There's been a lot of talk about credit in private equity in the last six-plus months. So how are current market conditions, from your perspective, really influencing the types of credit assets being brought to the secondary market and the way that these deals are structured? In the current market there's been a lot of talk about credit in private equity in the last six-plus months. So how are current market conditions, from your perspective, really influencing the types of credit assets being brought to the secondary market and the way that these deals are structured?

[Olga] Toki. No, nauhoitamme tätä 31. maaliskuuta. Niin. Joten menemättä jokaiseen yksittäiseen otsikkoon, on melko paljon. Toki. Jakaisin ne kahteen laajaan kategoriaan. Yksi kategoria liittyy arvostuksiin ja toinen likviditeettiin. Kun luottosekundaarisijoittajana arvioimme omaisuuserien poolia, portfoliota, tiettyä lainaa, joka on rahastossa, lähestymme sitä siitä näkökulmasta, miten arvostamme sen. Ja jos on delta ja ero niiden arvostusten välillä, jotka näemme, ja mihin annamme sille arvon. Joten mielestäni tässä suhteessa kyky tarkastella ja allekirjoittaa lainoja näkemissämme portfolioissa on erittäin tärkeä ominaisuus. Ja joskus arviomme eroaa näkemistämme arvostuksista. Tämä vaikuttaa hintaan. Toinen näkökohta on likviditeetti. Kuten keskustelimme, private luotto on epälikvidi omaisuusluokka, joten ihmiset etsivät likviditeettiä nykyisessä markkinassa, menneisyydessä, tulevaisuudessa, on jotain, mitä varten meidät on suunniteltu. Aivan. Tätä varten luottosekundaaristrategia on. Joten mielestäni likviditeetin tarjoaminen tällaisina aikoina on jotain, mitä odotamme tekevämme sekä GPs että LPs. Joten näkökulmastamme riippuen siitä, miten se tulee toteutumaan, on viive, mutta se johtaa mielenkiintoisempiin mahdollisuuksiin, jotka tulevat meidän suuntaamme, toivottavasti missä voimme tarjota likviditeettiratkaisuja. Joten menemättä jokaiseen yksittäiseen otsikkoon, on melko paljon. Jakaisin ne kahteen laajaan kategoriaan. Yksi kategoria liittyy arvostuksiin ja toinen likviditeettiin. Kun luottosekundaarisijoittajana arvioimme omaisuuserien poolia, portfoliota, tiettyä lainaa, joka on rahastossa, lähestymme sitä siitä näkökulmasta, miten arvostamme sen. Ja jos on delta ja ero niiden arvostusten välillä, jotka näemme, ja mihin annamme sille arvon. Joten mielestäni tässä suhteessa kyky tarkastella ja allekirjoittaa lainoja näkemissämme portfolioissa on erittäin tärkeä ominaisuus. Ja joskus arviomme eroaa näkemistämme arvostuksista. Tämä vaikuttaa hintaan. Toinen näkökohta on likviditeetti. Kuten keskustelimme, private luotto on epälikvidi omaisuusluokka, joten ihmiset etsivät likviditeettiä nykyisessä markkinassa, menneisyydessä, tulevaisuudessa, on jotain, mitä varten meidät on suunniteltu. Tätä varten luottosekundaaristrategia on. Joten mielestäni likviditeetin tarjoaminen tällaisina aikoina on jotain, mitä odotamme tekevämme sekä GPs että LPs. Joten näkökulmastamme riippuen siitä, miten se tulee toteutumaan, on viive, mutta se johtaa mielenkiintoisempiin mahdollisuuksiin, jotka tulevat meidän suuntaamme, toivottavasti missä voimme tarjota likviditeettiratkaisuja.[Olga] Sure. Well, we're recording this on 31st of March. Yeah. So without going into every specific headline, there's quite a lot. Sure. I would put them in two broad buckets. So one bucket is to do with valuations, and the other one is with liquidity. So when, as a credit secondaries investor, we assess a pool of assets, a portfolio, a specific loan that sits in the fund, we approach it from a perspective of how we value it. And if there is any delta and a difference between the valuations that we see and where we assign the value to it. So I think in that regard, having an ability to look through and underwrite loans in the portfolios that we see is a very important feature. And sometimes, our assessment differs from the valuations that we see. So that drives the price. So the other aspect of it is the liquidity. As we talked about, private credit is an illiquid asset class, so people searching for liquidity in the current market, in the past, in the future, is something that, what we were designed for. That's right. This is what credit secondary strategy is for. So I think providing liquidity in times like this is something that we will look forward to do for both GPs and LPs. So from our perspective, depending how it's going to play out, there is a lag, but that will lead to more interesting opportunities coming our way, hopefully where we can provide liquidity solutions. So without going into every specific headline, there's quite a lot. I would put them in two broad buckets. So one bucket is to do with valuations, and the other one is with liquidity. So when, as a credit secondaries investor, we assess a pool of assets, a portfolio, a specific loan that sits in the fund, we approach it from a perspective of how we value it. And if there is any delta and a difference between the valuations that we see and where we assign the value to it. So I think in that regard, having an ability to look through and underwrite loans in the portfolios that we see is a very important feature. And sometimes, our assessment differs from the valuations that we see. So that drives the price. So the other aspect of it is the liquidity. As we talked about, private credit is an illiquid asset class, so people searching for liquidity in the current market, in the past, in the future, is something that, what we were designed for. This is what credit secondary strategy is for. So I think providing liquidity in times like this is something that we will look forward to do for both GPs and LPs. So from our perspective, depending how it's going to play out, there is a lag, but that will lead to more interesting opportunities coming our way, hopefully where we can provide liquidity solutions.

[Rory] Mielestäni se on järkevää. Ja meidän näkökulmastamme uskomme myös vahvasti, että tulevaisuudessa GPs alkaa olla paljon harkitsevampia likviditeettinsä suhteen. Tämä on täydellinen siirtymä kohti tulevaisuutta. Pidän aina näiden segmenttien lopettamisesta katse kohti tulevaa. Vaikka voi olla vielä melko varhaista arvioida luottokontinuaatiovälineiden lopullista suorituskykyä, mitkä tekijät mielestäsi jatkavat vahvojen tulosten tukemista lähitulevaisuudessa? Ja mitä sijoittajien pitäisi seurata tarkimmin seuraavien 12-24 kuukauden aikana?[Rory] I think that makes a lot of sense. And from our perspective, we also very much believe that kind of going forward, GPs are going to start to be a lot more thoughtful about their approach to liquidity. Which is a perfect segue to the look toward the future. I always like to end these segments with an eye toward what's coming next. So it may still be pretty early on to judge the ultimate performance of credit continuation vehicles, but what factors do you believe will continue to kind of underpin strong outcomes in the near term? And then what should investors watch most closely over the next 12 to 24 months?

[Olga] Erittäin hyviä kysymyksiä molemmilta puolilta. Joten menneisyyteen katsoen, mitkä tekijät auttoivat kauppoja menestymään hyvin? Valinnanvapaus omaisuuserien valinnassa. Sen puuttuessa erittäin, erittäin kurinalainen hinnoittelu. Ja se on omaisuuserien puolella, taseen vasemmalla puolella. Yhdistettynä rakenteeseen, jossa emme ole stressaantuneen myyjän asemassa. Mielestäni se on myös tärkeä huomio, ja me stressitestataan sitä, joten näin käymme läpi prosessimme. Joten mielestäni vahva vakaumus sekä omaisuuserien puolella että rakenteessa itsessään matters paljon. Ja nämä kaupat, kokemukseni mukaan, ylittivät odotukset. Tulevaisuuteen katsoen, mielestäni on mielenkiintoista nähdä, miten markkinat sulattavat joitakin arvostushaasteita. Ja siellä on itsesääntelymekanismi. Jos osa markkinoista joutuu ostamaan omaisuuserät NAV:lla, mielestäni ihmiset unohtavat itsesääntelyn merkityksen, koska GPs ovat motivoituneita tuomaan arvostukset linjaan sen kanssa, mitä he pitävät todellisena. Joten mielestäni tämä on eräänlainen itseään vahvistava, itsesääntelyprosessi. Toinen asia, joka voi olla mielenkiintoista seurata, ja olen maininnut, että markkinavolatiliteetin ja luottosekundaareiden välillä on viive, mutta mielenkiintoista seurata on LP-vetoisten kauppojen virta. Viime vuonna LP-vetoiset kaupat olivat hyvin pieni osa markkinoista verrattuna jatkumoajoneuvoihin. Katsotaan, nouseeko se. Mielestäni tämä on jotain, mitä seuraamme. Ja katsotaan, miten se kehittyy.[Olga] Very good questions on both fronts. So looking in the past, what factors helped for the deals to perform well? The optionality on asset selection. In the absence of that, a very, very disciplined pricing. And that's on the asset side, the left side of the balance sheet. Coupled with a structure where we're not in the position of a stressed seller. I think that's an important consideration as well, and we stress test it, so that's how we go through our process. So I think having the high conviction on both asset side and the structure itself matters a lot. And those deals, in my experience, outperformed. Looking forward, I think it will be interesting to see how the market metabolizes some of the valuation challenges. The other thing that may be interesting to watch, and I've mentioned that there is a lag between the market volatility and what happens on credit secondaries, but what will be interesting to watch is a flow of LP-led deals. Last year, LP-led deals were a very minimal fraction of the market compared to continuation vehicles. We'll see if that picks up. I think this is something that we're watching. And we'll see how it plays out.

[Rory] Really, really interesting dynamics happening here, and it will be very interesting for us and probably even more so for you to continue to see these dynamics evolve. Thank you so much for joining us for the conversation today-

[Olga] Thanks for having me

[Rory] Olga. It was our pleasure. And if viewers would like to learn more about Antares Private Credit Secondaries offerings, you can find more information at the links below.