InsightsDec 2025

Why Secondaries
outperform

We enter where the j-curve ends, not where it begins. By acquiring proven equity stakes at a discount to NAV, we compress both risk and time-to-return. The interactive explainer below walks through the structure, the mechanics, and the structural gap we are purpose-built to close in MENA.

01 Skip the J-Curve: enter after the pain

Enter after the pain, start in the money

Primary funds follow a predictable arc: years of negative returns driven by management fees, early-stage failures, and the slow pace of capital deployment. The J-curve is not a bug, it is the structural cost of building a portfolio from scratch. Secondaries investors bypass it altogether, entering after companies have established track records and acquiring stakes at a discount to their reported value.

Primary fund
Secondaries entry
Illustrative only. Not a guarantee of future performance. Secondaries entry at year 3–4 equivalent. Discount assumes 25% below last reported NAV.
02 The transaction: buyer, seller, founder

How stakes change hands

In a secondary transaction, an existing equity stake changes hands rather than new capital entering a company. The seller, typically an early investor or founder seeking liquidity, accepts a discount to the last reported NAV in exchange for certainty and speed. The buyer acquires a proven asset at a price that builds in a margin of safety from day one. Because the underlying companies are already mature, the path to exit is compressed, with LP distributions arriving 3 to 5 years earlier than in a traditional primary fund structure.

Seller
Early Investor
Needs liquidity
Cannot wait 5–10 yrs
Stake
15–35%
discount
Secondary Fund
Acquires at NAV − 15–35%
Discounted entry
Risk-adjusted return
Cash
now
Seller / Founder
Liquidity Event
Partial exit
Stays at company
Exit
proceeds
At Exit: M&A / IPO
LP Returns
Compressed hold
Higher multiple
03 Returns and market size

The maths behind the opportunity

Every secondaries thesis rests on two questions: do the deal economics work, and is the market large enough to deploy into? The models below let you stress-test both. Adjust the assumptions and watch the numbers move.

How discounts create value
Use the model below to see how discount, exit multiple, and hold period interact to shape returns.
Discount25%
Exit mult.2.0×
Hold (yrs)4 yrs
$0.75
Entry / $1 NAV
33%
Margin of safety
2.67×
MOIC at exit
28%
Implied IRR
MOIC = exit multiple ÷ entry cost. IRR assumes single cashflow at end of hold period.
Estimated market opportunity
Use the model below to see how capital, secondary availability, and annual transactions size the opportunity.
VC deployed$15B
Secondary %20%
Penetration3%
$3.0B
Addressable pool
$90M
Annual deal flow
~0%
Current txn %
$240B
Global secondary mkt
MENA secondary penetration is near zero today. Global benchmark: 2-3% of AUM. Sources: MAGNiTT, Jefferies 2025.
For illustrative purposes only. Not investment advice. Past performance is not indicative of future results.
Related insights