Buying in the Secondary Market — What The Champion Fund Gains and What It Gives Up

Why Good Assets Come Up for Sale Early

Secondary interests rarely become available because the underlying asset has gone wrong. They become available because the holder's circumstances changed — a limited partner with a liquidity need on a different timeline than the fund they committed to, a fund reaching the end of its life holding assets that still have room to run, an institution rebalancing after public markets fall and its private allocation drifts above policy weight.

In each case the seller is pricing their own need for liquidity, not the asset's remaining potential. That gap is the opportunity, and it is why a patient buyer can sometimes find better terms in the secondary market than in a competitive primary round.

What the Fund Gains

Visibility: a secondary buyer underwrites a company that already exists, with real operating history, rather than committing to a blind pool. Time: the asset is further along, so the remaining hold to a repricing event is shorter than from a standing start. Price: the negotiation is with a motivated seller rather than against a field of bidders.

What the Fund Gives Up

Secondary investing carries risks primary investing does not, and they deserve equal space.

The information is somebody else's — financial and operating data is generally prepared by the sponsor of that investment, may be incomplete or unreliable, and may not be independently verifiable by the Subadviser. The terms are not negotiable; a secondary buyer inherits the deal as it was struck, including any special rights that were negotiated by someone else. Valuation is genuinely difficult, because there is no established market for these interests — the same fact that creates the pricing opportunity. Portfolios sometimes come all or nothing, offered as a single lot where it may not be possible to carve out the interests the Subadviser considers less attractive. And contingent liabilities can travel with the position.

None of this argues against the secondary market. It argues for underwriting it as its own discipline. A discount that exists because the information is thin is not the same as a discount that exists because the seller needs cash by a date.

Why the Structure Fits the Strategy

An evergreen fund has no fund-life clock forcing a sale into a window, and no capital calls forcing investors to fund a purchase on someone else's schedule. The Fund can wait for the seller who needs a buyer instead of bidding for the asset everyone wants.

One clarification, since the subject invites it: none of this changes the liquidity of Fund Shares. Shares are not listed on any exchange, no secondary market for them is expected to develop, and liquidity for an investment in Shares is provided only through the Fund's periodic repurchase offers.† The secondary market described here is one the Fund buys in — not one shareholders sell in.

† The Fund's first repurchase offer is scheduled for August 2027. Repurchase offers are for 5% of the Fund's outstanding Shares at NAV, in February and August, and may be oversubscribed and prorated.

This content is for informational and educational purposes only and does not constitute investment advice or an offer to buy or sell any security. Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal. Please read The Champion Fund's prospectus carefully before investing.