The Problem
Private equity has historically outperformed. The data is not close.
A dollar invested in private equity in 2015 grew to $3.96 by 2024. The same dollar in the S&P 500 grew to $3.51. In the MSCI World, $2.61 (Hamilton Lane 2025 Market Overview).
Over longer horizons the gap widens. Since 2000, private equity has returned approximately 13% annualized versus 8% for public equities on the Russell 3000. Compounded over 24 years: 19.9x net for PE versus 6.6x for public markets (Hamilton Lane 2025). Top two quartile PE funds have delivered excess returns net of all fees, including carry (KKR).
The public penalty
Being a public company is expensive.
SOX compliance alone averages $2.3 million per year and 15,580 staff hours (KPMG 2025 SOX Survey). Over 50% of public companies report those costs increasing year over year (GAO). None of it buys product improvement, customer acquisition, or competitive advantage.
U.S. public companies have dropped 50% since the 1990s (Columbia Business School). Median revenue at IPO is now $218 million. Over 1,200 unicorns are choosing to stay private (CNBC).
The costs go beyond compliance. Quarterly earnings pressure penalizes long term investment. Governance optimizes for liability avoidance over value creation. Going public means surrendering operational freedom for capital market access. The best companies have decided that trade is no longer worth making, and the value creation happens before any public investor can participate.
The private penalty
Capital goes in. It does not come out.
Five year rolling DPI (distributions to paid in capital) hit its lowest recorded level in 2025 (McKinsey Global Private Markets Report 2026). Distributions as a percentage of AUM fell to 6% in early 2025, versus the 16% average from 2015 to 2019. Average buyout hold periods reached 6.6 years, the highest in two decades. The median fund launched in 2019 had DPI of just 22% at the five year mark.
GPs routinely keep capital locked for 12+ years. LPs committed capital expecting 7 to 10 year fund lives and are receiving distributions on timelines closer to 12 to 15.
No liquidity means no rebalancing. No price discovery means no accurate portfolio valuation between quarterly marks. No portability means you cannot move your position when your thesis changes or your institution needs the capital elsewhere.
LPs are already telling you this is broken
The clearest signal: the secondaries market. In 2025, secondaries volume hit $240 billion, up 48% year over year (McKinsey/Jefferies, CAIS).
LPs sell positions at discounts to NAV, pay transaction costs, and accept information asymmetry because the underlying fund structure offers no exit.
When investors spend $240 billion per year working around your product’s limitations, you do not have a liquidity problem. You have a structural problem.
Secondary platforms exist. They inherit the same structural issues: bilateral negotiation, NAV discounts, information asymmetry, weeks to settle. They make it easier to exit. They do not make the position liquid. A liquid position has continuous price discovery, rapid settlement, and no counterparty negotiation. A secondary sale is a negotiated exit with fewer phone calls.
The thesis
Private equity has historically outperformed because the best companies stay private. But accessing those returns means accepting the private penalty: illiquidity, opacity, lock up.
The legal foundation is the 3(c)(7) exemption from registration under the Investment Company Act of 1940. This federal exemption lets investment funds operate without public fund overhead as long as every investor meets a qualified purchaser threshold. When every SPV follows the same structure and the same data model, positions become fungible. Fungibility enables a market. A market enables price discovery. Price discovery enables liquidity.
The remaining question is where deals come from. In traditional private markets, a fund manager selects companies, negotiates terms, and then searches for investors willing to commit. Vex inverts this. Qualified investors browse a catalog of private companies and express demand by committing capital. When enough demand concentrates on a specific company, the SPV forms around that demand through an open book build. The market itself determines what gets structured and at what price.
Investor conviction drives capital formation. Companies that attract real demand get funded. Companies that do not attract demand do not get structured at all. The result is a market where price reflects actual investor appetite rather than a GP’s portfolio construction thesis.
This document is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investing in private market securities involves substantial risk, including the possible loss of principal. Past performance is not indicative of future results. Liquidity depends on counterparty availability and is not guaranteed. Neither Vex Securities nor its affiliates facilitate the sale of tokenized units or make recommendations related to their use. Securities offered through Vex Securities LLC, Member FINRA/SIPC.