Secondary Fund Economics ModelFree Financial Model Download
Model secondary fund returns and J-curve without treating all secondaries as a black box. Track position-level cash flows by vintage, management fees, and weighted IRR contributions in a single LP-view framework.
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About this model
Model secondary fund returns and J-curve for LP-view investors acquiring existing fund interests at a discount to reported NAV. The model projects cash inflows from distributions (15-30% of portfolio NAV realised annually in harvest phase) and outflows from unfunded commitment calls (10-30% of remaining unfunded per year). It calculates entry discount impact, models NAV appreciation/depreciation by fund vintage, and outputs gross and net IRR (before/after management fees and carry) plus DPI, RVPI, and TVPI multiples.
Key mechanics: purchase price is discounted NAV; distributions come in lumpy, back-loaded waves as underlying GP exits portfolio companies; unfunded calls must be reserved for; and the buyer assumes the GP's remaining hold period (typically 3-5 years of distributions). Leverage is optional (NAV facilities at 20-40% LTV with SOFR+200-400 bps). The model isolates gross returns (1.4-1.8x MOIC) from net-of-fee returns (1.3-1.6x) and includes sensitivity to entry discount and realisation pace.
Target audience: secondaries funds, pension funds, endowments, and institutional LPs evaluating secondary interest acquisitions. Critical for understanding tail-risk funds and how discount-to-NAV creates return potential at different realisation speeds.
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Formatted to IB standards.
Named theme colors repaint the whole workbook in one click, on top of an investment-banking structure with blue inputs, black formulas, and green cross-sheet links.
- Brand-ready
- Institutional grade
- Fully auditable
What's included
- Secondary position-level cash flow forecasts by vintage
- Portfolio composition by primary fund vintage and strategy
- Management fees, expense ratios, and carry impact
- J-curve modeling for fund maturity and return acceleration
- Weighted average IRR and MOIC by fund vintage
J-curve modeled explicitly
Early-year underperformance and mid-fund return acceleration are captured directly, so LP expectations are set correctly from the start.
Gross vs. net return transparency
Management fees and carry are applied at the position level so you can see the true cost of secondary fund wrappers on net LP returns.
Vintage and strategy attribution
Return contribution by fund vintage and strategy identifies concentration risk and guides future LP allocation decisions.
Frequently asked
What is a secondary fund?+
A secondary fund buys existing LP interests in primary PE or VC funds, usually at a discount. LPs get quicker liquidity; the secondary manager gets an LP-like position with upside.
What is the J-curve in secondary funds?+
Early returns are negative or flat because of management fees and drag from positions purchased near the end of primary fund lives. Returns accelerate in years 3-5 as exits occur.
What is a typical secondary fund IRR?+
Secondary funds typically target 12-18% gross IRR depending on vintage and market. Net returns after fees typically range 10-15%.
How does vintage concentration affect risk?+
Heavy exposure to a single vintage year creates concentration risk if that vintage underperforms. The model shows vintage-level return contribution so you can identify this early.
Who uses secondary fund models?+
Fund of funds managers, pension funds, endowments, and LPs use them to evaluate secondary fund commitments, benchmark returns, and guide allocation decisions.
Alex Tapio
Founder of Finamodel • Professional Financial Modeller • Ex-Deloitte
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