As the private credit secondaries market continues to show promising opportunities, private debt specialist Antares Capital is working to build out its secondaries capabilities.
The Chicago-headquartered firm, which has more than $81 billion in assets under management, hired Olga Kosters earlier this year from Apollo Global Management to spearhead the strategy focused on GP-led and LP-led credit secondaries opportunities. It is deploying into the space via Antares’ balance sheet capital, Kosters told Secondaries Investor.
Antares completed multiple secondaries deals in 2024 and planned to increase its activity over the course of the year, the statement announcing Kosters’ hire said. Earlier this month the firm closed its first continuation vehicle. Ares Management’s credit secondaries fund led the $1.2 billion deal, which involved 100 underlying first-lien, floating-rate loans.
Secondaries Investor caught up with managing director and head of credit secondaries Kosters to discuss what’s driving credit secondaries market activity and what she described as phase two of the market’s evolution. While she declined to comment on specifics of the CV, she did say the firm wants to play an “active role” across credit secondaries opportunities.
This conversation has been lightly edited for clarity and brevity.
Antares just closed its first CV. Does the firm plan to utilise the technology more regularly moving forward?
Antares wants to play an active role in credit secondaries. A CV is just one example of how that may play out and obviously here we are partnering with Ares Credit Secondaries and we are on the sell side, so to speak. It’s very important to be active and to look at both opportunities where we can invest, but also opportunities where we can partner with people like Ares and structure vehicles that make sense for our LPs.
The credit secondaries market is booming right now. We saw a number of $1 billion-plus GP-led credit deals completed last year. What are the key trends driving dealflow and volume?
I would say the biggest [underlying] driver [of the credit secondaries market] was probably the maturity of the primary market, but any volatility and any jolts to the system brought and expanded the interest. Following covid… that brought to market participants the recognition of the fact that they will need liquidity. Then, as market developed, there was more capital formation. It was a self-fulfilling course of events.
Both GPs, but also some of the LPs, saw secondaries as a very good path for them to find a solution. If they had a regulatory issue, for example, on the LP side, they had to bring down their private assets exposure. For them, that was the way to come to the secondaries market and sell. There were sizable portfolios that were coming to the market.
On the GP-led side, what was interesting is GPs [were] looking and evaluating their options. Once they saw that it’s the highest quality GPs that are coming to this party, they felt like, ‘Hey, this is something interesting, it’s happening, and we have to spend time looking at that’. There was no, ‘Oh, it’s only for a subset of GPs or it’s only for tail-end funds.’
The several deals that were $1 billion-plus showed people that there is depth to this market and they wanted to be part of it. I know there are a lot of people who are currently thinking and considering setting up continuation vehicles. I think it’s just going to grow from here.
How is the credit secondaries market deploying capital amid the uncertainty seen this year?
Comparing [the market] to where it was five years ago, at the time, the main question was, does the market even exist?
When I look back, I think about two phases. One phase, pretty much up until now, from the market participants’ perspective was: let’s buy the market. Let’s look at everything, let’s underwrite everything, let’s participate and then lead as many deals as we can.
From now on, because of that heightened volatility, I think it’s going to be a phase two, where people are very discerning and very selective about the risk, where the underwriting on the credit side comes to [the] fore.
What is your approach to pricing and underwriting transactions? How does your approach differ versus a more general secondaries firm?
What matters, in my opinion, in this market of more dispersion and more volatility, is the ability to underwrite credit [and] ability to structure deals. We have a very strong structured credit team and capital solutions team. Those two go hand in hand. I would say the ability to be very selective will matter as well. All of those will come into play when people assess different opportunities in front of them. We have very patient capital. We’re not under pressure to deploy.
On the one hand, you can think about building a business and capturing market share. On the other hand, you have to think about your performance and the results of the deals that you are investing in. There is an overlap there, but sometimes there is a divergence. I would say in the current environment, the focus has to squarely be on taking the best risk and [taking] a really thoughtful [approach to] underwriting and attention to the deals.
As we move into 2025, how would you compare this year’s pipeline to last year’s?
The big trend is GP-led and a lot of interest coming from GPs. The direction of travel is clear.
[As to] the exact point where we’re going to end up by the end of the year, I think it’s going to be a range. I would hazard a guess [that the market will see] maybe $15 billion to $20 billion. It’s hard to say, but I think it’s going to be north of what closed deals were last year and north of the number of $1 billion-plus deals that were launched last year for sure.
