Monday Market Minute | Aug 10, 2020
The TSX Composite fully recovers from March lows as private market valuations lag by design, highlighting the smoothing effect of illiquid assets.
What Moved
The TSX Composite fully recovered from its March lows, trading back above 16,500 — effectively erasing the pandemic drawdown in less than five months. The S&P 500 achieved a similar milestone. Technology stocks led the recovery, with the Nasdaq hitting all-time highs. By contrast, private market fund valuations were still reflecting Q1 marks, with Q2 reports not yet widely distributed. The lag was structural — private assets are valued quarterly, not daily — creating a visual disconnect between public and private portfolio performance.
Why It Matters
The valuation lag in private markets was a feature, not a bug. Investors who held private credit or PE through the crisis experienced significantly less volatility in their reported portfolio values than those with equivalent public market exposure. This smoothing effect was one of the key benefits of private market allocations — it reduced the behavioral risk of panic selling during drawdowns. However, investors needed to understand that the smooth line did not mean the underlying assets were unaffected — it meant the measurement cadence was different.
Signal to Watch
Watch Q2 NAV reports from PE and private credit managers. The gap between Q1 and Q2 marks would reveal how quickly private valuations were catching up to the public market recovery.