“Whenever you have noise, that leads to more selling volume in our market – so volatility for us as secondary investors is a very good thing,” says Michael Schad, head of credit at Coller Capital, a secondaries specialist with $55 billion in AUM, on the latest episode of Credit Exchange with Lisa Lee.

Schad is positive about the overall health of private credit, describing it as a “very attractive and sound” asset class, with its rapid growth coming alongside a more recent maturing of the market.

He notes, though, that a decade is “not a very long time”, as some of the funds can run for that period of time. “Because the asset class was so new, people couldn’t really calibrate what would happen in a more volatile market environment, which we just happened to hit over the last couple of years.”

Schad explains that Coller generally engages in two types of transactions – buying fund positions where the seller is a limited partner (LP secondaries), and transactions where it is a general partner making the sales decision (GP secondaries). The latter have become increasingly popular more recently.

The firm is also a leader in the continuation fund market. Schad notes that the major evolution that has taken place over the last couple of years is that technology developed in the equity secondaries market for continuation funds, has been adopted “on steroids” in the credit secondaries market.

“[The reason] that was so successful… is that the way a continuation fund works in credit is very different to private equity,” he says.

“What you have now in private equity, it is maybe a single asset that gets into a continuation fund. In credit, what you have is actually still very diversified portfolios. So you still have high quality loans in a very, very diversified fashion that a GP brings to a continuation fund.”