Will you be missing the golden years of the secondary market?

Ben Topor
3 min readMay 4, 2020


It is common knowledge that in any crisis situation lies an attractive opportunity. On average, every 9 years, the US economy has experienced a recession. However, not all investment strategies suffer, on the contrary — some of them have excell and provide their investors with unparalleled market opportunities. One such strategy is called secondary investing.

This graph below, quoted from the Pitchbook report, shows that secondary funds with vintages during the crisis years of 2008–2010, outperform both Buyouts and Fund-of-Funds strategies in IRR and return multiples. Particularly, the secondary funds’ IRR stood at almost 15% during 2008, and continued to rise throughout the crisis years while the Buyout and Fund-of-Funds IRR declined.

Median global IRR by vintage fund

The key reason secondary funds outperform other asset classes in downturns is the inherent discounted point of entry as well as the ability to focus only on quality companies that are more resilient to market downturns. The market has historically proven that the larger the uncertainty, the larger the demand for liquidity (which translates to sellers accepting sharper discounts.)

By entering the market with dry powder at a downturn, the buyers enjoy greater bargaining power over sellers with respect to valuation and can demand extensive downside protection mechanisms.

When do the golden years for the secondary market start?

As of the current date (April 2020), the secondary market for venture capital funds has yet to adapt to any major downturn in the global market and the expected economical distress resulted from the pandemic. This is to a great extent because of venture accounting principals whereby funds typically revise their portfolio valuations only once or twice a year, and only when a tangible transaction occurs in a portfolio company. Also, companies, on their own end, are slow to revise their valuation downwards, as CEOs still hope that they will receive the high valuations which they’d had only a few months before. This is likely to change very soon.

Historically, a decrease in private companies’ valuations has lagged behind the public market in one or two quarters and then dropped by up to a 50% discount. During the downturn trajectory, and before signs of market revival, there becomes a window of opportunity or the “golden times” for secondaries, that is expected to happen only once a decade.

Discount level by fund type from 2007–2013

The bottom line: A few months from now will be the best time to buy positions in quality, mature companies at discounted prices, who are likely to survive the downturn and have a sharp valuation appreciation when the markets will revive in the ensuing years.



Ben Topor

Investor and Advisor in more than 30 growth equity and secondary transactions. Founder of Titan Capital Partners