MCA secondary market yields reflect the all-in returns buyers earn on secondary-market MCA portfolio purchases — combining purchase-price discount, ongoing collections, and recovery dynamics — measured as net annualized yield to the buyer.
Yield framework.
Secondary-market yield = (gross collections − recovery costs − servicing fees) / purchase price, annualized over expected wind-down period.
Yield by paper grade (2026 typical).
| Paper grade | Purchase price (% of NAV) | Gross yield | Net yield to buyer |
|---|---|---|---|
| A-paper performing | 92–98% | 11–15% | 8–14% |
| B-paper performing | 85–92% | 15–22% | 12–18% |
| C-paper performing | 70–82% | 22–32% | 18–26% |
| Early stress (30–60 DPD) | 55–75% | 35–55% | 22–38% |
| Mid stress (60–120 DPD) | 35–55% | 50–80% | 28–45% |
| Late stress / defaulted | 10–35% | 80–200%+ | 25–60% |
| LP fund interests | 75–95% | N/A | 10–18% (IRR) |
Why yield ranges vary by buyer type.
- Institutional credit funds (target 10–18%): buy performing A/B paper portfolios; emphasis on yield stability over upside.
- Specialized MCA secondary funds (target 15–25%): buy mixed performing/stressed portfolios; balanced risk-return.
- Hedge fund distressed desks (target 25–40%): buy stressed/distressed paper; absolute-return focus.
- Collections-specialized buyers (target 30–60%): buy defaulted/charge-off paper; deep operational specialization.
- PE platforms (varies): strategic acquisitions; yields blend with platform synergies.
Net yield calculation — performing A-paper portfolio example. - Portfolio face value: $100M - Purchase price: $95M (95% of NAV) - Expected gross collections over 14 months: $108M (factor rate-equivalent) - Operating servicing fees (2.5% of collections): $2.7M - Recovery costs (minimal on performing): $1.5M - Net collections to buyer: $103.8M - Net yield: ($103.8M − $95M) / $95M = 9.3% over 14 months = ~8% annualized
Net yield calculation — stressed portfolio example. - Portfolio face value: $50M - Purchase price: $15M (30% of NAV) - Expected gross recoveries over 30 months: $25M (50% of face) - Recovery costs (60% of recoveries): $15M - Net collections to buyer: $10M - Net MOIC: 0.67×; that's actually a loss - Reality: distressed buyers achieve 25–40% IRR through operational efficiency reducing recovery costs to 35–50% of recoveries
Yield drivers and sensitivities.
- Purchase price discount: every 5% reduction in purchase price adds ~3–4% to net yield (compounded over wind-down period)
- Recovery rate execution: ±10% recovery rate moves net yield by ±4–6%
- Recovery cost efficiency: in-house collections (20–35% cost) vs. vendor (40–60%) drives 5–10% yield differential
- Servicing fees: 2.5% vs. 4% servicing fees drives 1–2% yield differential
- Wind-down period: longer wind-down depresses annualized yield even if absolute recovery same
LP fund-interest secondary yields. - Pricing: 75–95% of NAV; vintage and remaining-term dependent - Net IRR to secondary buyer: 10–18% typical - Return profile: front-loaded (remaining capital calls + distributions in first 2–3 years post-purchase) - DPI multiplier: 1.2×–1.6× typical for buyer
2026 yield trends. - Compression in performing A-paper: institutional demand reducing performing A-paper yields from 10–14% (2022) to 8–14% (2026) - Expansion in distressed yields: abundant supply + limited buyer capacity supporting 25–60% distressed yields - B/C-paper stability: consistent 15–25% yields; broadly aligned with 2022–24 - LP interest secondary stability: mature pricing; consistent 10–18% IRR
Yield comparison vs. other asset classes (2026).
| Asset class | Typical net yield |
|---|---|
| Investment-grade corporate bonds | 4.5–6.0% |
| High-yield bonds | 7.5–10% |
| Bank loans (BSL) | 8–11% |
| Direct lending (private credit) | 9–12% |
| MCA secondary A-paper | 8–14% |
| MCA secondary B/C-paper | 15–25% |
| Distressed MCA paper | 25–60% |
| Distressed corporate debt | 12–25% |
Why MCA secondaries yield more than comparable credit. - Illiquidity premium: limited buyer universe = wider bid-ask spreads - Operational complexity: specialized servicing required = barrier to entry - Regulatory uncertainty: state-level COJ and disclosure variability - Data infrastructure gaps: loan-level data inconsistency = pricing risk premium - Reputational risk: SMB lending stigma = buyer aversion
Common confusions. - "Yield = factor rate." False — yield is buyer's net return, not merchant cost. - "All distressed yields are 50%+." False — recovery cost reality compresses true buyer yields to 25–60%. - "Yields are stable." False — yields fluctuate with credit cycles, supply-demand, and regulatory shifts.
Takeaway. MCA secondary market yields offer attractive risk-adjusted returns relative to comparable credit asset classes, with performing-paper yields of 8–14%, mixed B/C portfolios at 15–25%, and distressed paper at 25–60%. The yield premium reflects illiquidity, operational complexity, and regulatory uncertainty. Sophisticated buyers with operational infrastructure can capture upper-end yields; passive buyers receive market-clearing rates.
Related terms
- MCA secondary market bid-ask spread (2026) — MCA secondary market bid-ask spreads range from 3–8% for performing A-paper to 25–50% for distressed paper, reflecting illiquidity, info asymmetry, and limited buyer competition.
- MCA portfolio typical bid levels (2026) — Typical 2026 MCA portfolio bids range from 92–98% of NAV for performing A-paper, 70–85% for mixed B/C portfolios, and 10–35% for distressed paper, with pricing depending on data quality, vintage, and concentration.
- MCA distressed paper buyer economics (2026) — Distressed MCA paper buyers target 25–60% IRR on stressed/defaulted receivables purchased at 5–35% of face value, monetizing through aggressive collections, litigation, and structured workouts.
- MCA distressed debt portfolio economics (2026) — Distressed MCA debt portfolios — typically $25M–$500M face value purchased at 15–40% of face — target 20–35% net IRR over 3–5 year wind-down via mixed collections, litigation, and restructuring strategies.
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