Big Law Chases Deals Money in Private Credit Funds Wave

A popular Wall Street tool to extend the life of private credit portfolios is driving work to corporate lawyers who have developed a specialty in the niche transactions.

Continuation funds let private credit investors roll over their investments into new vehicles to avoid selling assets at a discount or to help manage liquidity or other portfolio goals. Big Law finance teams have followed their clients in turning to alternative forms of transactional work after the wave of mergers and acquisitions and initial public offerings leveled off.

A team of Hogan Lovells lawyers in January guided lead investor Pantheon Ventures in a continuation fund transaction in which Crescent Capital Group collected $3.2 billion. Kirkland & Ellis guided Crescent Capital, in what was largest raise for a vehicle dedicated to credit secondaries in history.

Private credit continuation funds have “become a recognized, accepted, strategic tool used by sponsors in the market,” said Adam Brown, a Hogan Lovells corporate and finance partner who worked on the Crescent deal. “I don’t think it’s going anywhere.”

The credit secondaries market nearly doubled in 2025, with annual transaction volume reaching $20 billion, up from $10.9 billion in 2024, Bloomberg News reported Feb. 10, citing Evercore.

Coller Capital last month closed a deal to extend the life of an Ares Management Corp. private credit portfolio, amassing more than $1.3 billion in total commitments. Kirkland & Ellis guided Coller Capital and Proskauer Rose steered Ares.

“This is the maturation of the credit secondaries market,” said Galen Lewis, a corporate partner in the private funds group at Proskauer. The private equity secondaries market took “a long time to get to the continuation funds version of itself, and the credit market has caught up more quickly,” he said.

Credit Boom

The demand for the funds is a natural outgrowth of the boom in private credit, according to lawyers who work on the transactions.

The private credit market more than doubled in size from 2018 to 2023, as many banks pulled back from leveraged lending driven in part by tighter regulations after the global financial crisis, TD Cowen said in a report last May. The market has reached $3.5 trillion assets under management, the Alternative Credit Council said in a December report.

Top of mind for lawyers is the challenge of running a fair process, even when these transactions have a fundamental clash of interest, said Lauren King, who co-leads the fund transactions practice at Simpson Thacher & Bartlett. “The sponsor is on the buy side and the sell side, and they’re going to continue to manage these assets,” she said.

Funds that acquired their portfolio companies using a significant amount of borrowed money at a low rate in 2022 are searching for ways to extend their existing loans rather than refinance at a higher rate, Hogan Lovells’ Brown said. A continuation fund allows that to happen, he said.

“You have investors in those funds that need returns in order to meet capital calls for other funds, or have allocation obligations,” Brown said.

Price Discovery

Funds lawyers focus on ensuring that there is “adequate price discovery and adequate disclosure,” and that parties are collaborating with investors and limited partner advisory committees, said Dan Drabkin, a Sidley partner who joined the investment funds group from Clifford Chance in January.

“These are naturally, inherently, conflicted transactions, and there are processes and protections that you can implement and put into place,” he said.

While private credit continuation funds are structured similarly to those in private equity, the investment is “driven by different considerations, different purposes and different analysis,” said Elizabeth Shea Fries, a Sidley Austin partner who is the global leader of the firm’s investment funds practice.

A private credit continuation fund feels “much more like a portfolio management tool than it does in the private equity space, where it’s an exit tool,” she said.

The purpose of continuation funds is no longer to provide a lifeline to low-performing assets, King said. That structure “has its roots in zombie funds, but it’s been shedding that reputation now, as the market has grown,” she said.