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    May 15, 2025

Unique Features of GP‑Led Private Credit Secondaries Funds

As an asset class, private credit has grown rapidly since the 2008 global financial crisis to fill the gap in lending options left by traditional banks. At the same time, the secondaries market has exploded in popularity, particularly as GP‑led secondaries have proven to be a viable liquidity option for both sponsors and investors. Against that backdrop, a notable recent trend has been the surge in popularity in funds offering a confluence of those two burgeoning areas of the private funds industry – GP‑led private credit secondaries funds. Although the actual number of GP‑led private credit secondaries funds may still be small compared to traditional GP‑led PE secondaries vehicles, the market is expected to continue to grow worldwide. However, sponsors that consider launching GP‑led private credit secondaries funds need to weigh some of the distinct differences of forming, launching and managing those types of funds compared to traditional GP‑led PE secondaries transactions. This article examines unique structural and transactional features of GP‑led private credit secondaries funds, including the complexities of purchase price calculations wrought by the numerous inflows and outflows of various types of private credit assets and the array of potential for conflicts of interest for sponsors to manage related to asset valuations, the sale and purchase of assets and the use of leverage. See our two-part series: “Trends in the GP‑Led Secondaries Market and Criteria for Investors to Evaluate Opportunities” (May 31, 2022); and “Pressure Points When Performing GP‑Led Secondaries, Including Valuations and Conflicts of Interest” (Jun. 7, 2022).

SEC Sanctions Investment Adviser and CCO for Compliance Failures That Allowed Misappropriations

In one of its first enforcement actions under the new Trump administration involving the private funds industry, the SEC has settled charges against a registered investment adviser; its former managing partner and CCO; and its former COO and partner. Although the enforcement actions arose from misappropriations and clearly egregious conduct, there are nuances that may provide useful insights into how the SEC will approach CCO liability and other compliance issues under the Trump administration. This article summarizes the two settlement orders and provides key takeaways from interviews the Private Equity Law Report conducted with industry experts about the enforcement actions. For coverage of other SEC actions against CCOs, see “SEC Fines and Bars CCO From the Funds Industry for Compliance Failures and Deceiving OCIE” (Nov. 10, 2020); and “Absence of Harm No Defense Against Conflicts of Interest: SEC Issues Lifetime Bar From Compliance Work to CCO” (Sep. 13, 2018).

FCA Proposes Far‑Reaching Changes to U.K. Managers’ Valuation Policies and Practices

The U.K.’s Financial Conduct Authority (FCA) has released a report (Report) that offers remedies for perceived shortcomings in the accuracy and fairness of asset valuations. The Report presents data from a two-phase study of investment advisers operating under the FCA’s purview, including U.K.‑based fund managers and U.K. entities subject to the Markets in Financial Instruments Directive. In the FCA’s view, many investment advisers have a long way to go when it comes to keeping valuations independent of investment management, properly adjusting valuations when appropriate, making necessary disclosures and adhering to standards of transparency and fairness in valuations. Not all the Report’s findings are negative, however. The Report also affirms the soundness of some valuation practices and the integrity of many of the entities surveyed. This article summarizes key takeaways from the Report for closed-end fund managers, including concrete proposals offered by the FCA to boost the transparency and reliability of valuation policies and practices. The article also offers commentary on the Report’s findings from interviews conducted with U.K. regulatory experts. See “SBAI Introduces New Standards and Accompanying Guidance on Valuing Illiquid Assets” (Apr. 3, 2025).

Maturing GP Stakes Market Brings New Exit Options and Deal Dynamics

The market for GP stakes transactions has grown over the last decade as GPs have reaped the rewards of newfound liquidity while investors have benefited from the steady cash flow generated by firms. An alignment of interests is a key component for successful GP stakes investments, however, and the market continues to evolve as the parties and their advisers negotiate their way toward a satisfactory balance – including creating exit opportunities for investors in an otherwise inherently illiquid asset class. As part of its Private Funds 2025: Developments & Opportunities conference, Sidley Austin hosted a panel on the current state of play and recent developments in GP stakes transactions. The program was moderated by Sidley Austin partner Joseph Schwartz, and featured his partners, Ayo K. Badejo and Andrew Colosimo; as well as Melvin Hibberd, managing director and chief investment officer (CIO) at Hunter Point Capital LP; and Michael Shedosky, co‑CIO at Azimut Alternative Capital Partners. This article summarizes the key takeaways from the discussion. For additional insights from Sidley Austin partners, see “Operational and Tax Challenges of Hybrid Funds” (Nov. 5, 2019); and “Trends in GP‑Led Secondary Transactions and Rep & Warranty Insurance” (Apr. 2, 2019).

Six Steps to Address the SEC’s Trump Era Cyber Enforcement Priorities

The SEC’s cyber police force still plans to patrol the markets during President Trump’s second administration, although it will carry a new name – the Cyber and Emerging Technologies Unit (CETU). The Commission announced seven priorities for CETU, six of which emphasize fraud, with artificial intelligence (AI) deception topping the list. This article discusses the SEC’s cyber and AI enforcement efforts on the horizon, and provides six steps that companies can consider to prepare for CETU’s new priorities, with insights from SEC enforcement specialists at A&O Shearman, Davis Polk, Debevoise, Katz Banks Kumin and Morrison & Foerster. See “SEC 2025 Examination Priorities Feature Essential Compliance Concerns, Emerging Technologies and Several Notable Omissions” (Dec. 12, 2024).

Latham & Watkins Adds Fund Formation Expert Mark Proctor in New York

Mark Proctor has joined the New York office of Latham & Watkins as a partner in its investment funds practice. He focuses on structuring, establishing and operating private investment funds, with a particular emphasis on fund formation. For insights from Proctor, see our two-part series: “Rising Popularity of Interval Funds and How Fund Managers Manage Attendant Regulatory Requirements” (Mar. 21, 2024); and “Attaining Fundraising Benefits From Interval Funds While Overcoming Operational Challenges” (Apr. 4, 2024).

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