Private Tech’s Decade of Dominance: How % Returns Outpaced Nasdaq

Over the last decade, the private tech sector has experienced an unprecedented period of growth, leaving traditional public market indices, like the Nasdaq and S&P 500, far behind in terms of returns. Data from Morningstar reveals a staggering 693.8% cumulative return from the world’s top 20 private tech companies between 2014 and 2025. In comparison, the Nasdaq managed a 525.8% return, while the S&P 500 earned just 338.3% in the same period. This explosive growth has not gone unnoticed, with investment firms like Harel Alternative seizing the opportunity to create new funds that allow investors access to this high-performing market segment.

These remarkable returns are now being leveraged by Harel Alternative, the investment arm of Harel Finance, which is launching a fund that allows investors to participate in the success of the largest private tech companies. The new fund will focus on secondary market transactions to gain access to shares of companies like SpaceX, OpenAI, and Revolut—companies that have demonstrated immense value in recent years.

Summary

Morningstar’s data highlights a striking discrepancy in the growth of private tech firms compared to major market indices. The top 20 private tech companies have outperformed both the Nasdaq and S&P 500, with returns of nearly 700% from December 2014 to February 2025. These results have driven the creation of a fund by Harel Alternative that tracks the “Morningstar PitchBook Unicorn Top 20” index, which includes companies like SpaceX, xAI, OpenAI, and Databricks.

The fund aims to give investors access to this elite group through secondary market transactions, bypassing the traditional IPO route. The secondary market, which reached a total of $162 billion in 2024, allows for the buying and selling of shares in mature private tech firms. Harel Alternative’s new fund will make investments based on liquidity availability, which offers more flexibility than fixed allocations.

Unlike typical venture capital funds, which focus on early-stage investments, Harel’s fund targets firms that are already large and well-established. The fund’s focus is on flexibility and liquidity, making it more adaptable to market shifts. However, the timing of this fund launch comes amidst market volatility and challenges in the IPO market. The shrinking IPO window, partly due to geopolitical tensions and economic uncertainty, poses challenges for the liquidity of private tech companies. Nevertheless, Harel is optimistic, as many of the companies in the fund are considered IPO-ready.

What Undercode Says:

The private tech sector’s impressive returns over the last decade are a testament to its resilience and potential. With a near 700% return, these companies have consistently outperformed broader market indices, like the Nasdaq, which only managed a return of around 525% in the same period. It’s important to note that the rise of private tech giants like SpaceX and OpenAI isn’t purely based on traditional market forces. Instead, it’s a mix of private funding, strategic investments, and the rapid evolution of technology that has allowed these companies to skyrocket in value.

Harel Alternative’s strategy of using secondary market transactions to gain access to private tech shares is a unique approach that offers significant flexibility. The secondary market has become increasingly vital in providing liquidity to investors in mature private firms, allowing companies to grow without the pressure of an impending IPO. This market’s rapid expansion—from $112 billion in 2023 to $162 billion in 2024—shows a growing appetite for private tech investments, and Harel is well-positioned to capitalize on this trend.

However, it’s crucial to acknowledge the risks. While the private tech market has delivered remarkable returns in recent years, it’s not immune to volatility. In fact, the broader tech market, represented by indices like the Nasdaq, has experienced significant downturns in 2024, driven by global economic factors and political tensions. These headwinds could pose challenges for private tech valuations as well, since many of these firms’ worth is based on expectations of future growth and liquidity events.

The fund’s structure, with its relatively low management fees and success fees, is also designed to attract investors looking for flexibility and high potential returns. Yet, the fund’s smaller size, targeting just $50 million, suggests a more selective investment strategy, potentially focusing on high-performing companies with the best liquidity access.

Another key point is the shrinking IPO window. The private market’s current struggle with IPOs reflects a broader slowdown in the tech sector, which might limit the exit strategies for investors in these companies. Harel’s confidence that these companies are “IPO-ready” when market conditions improve speaks to the firm’s belief in the long-term viability of this investment approach.

With a shorter-than-usual fund lifecycle of three years, plus two optional one-year extensions, Harel is betting that private tech will regain its momentum in the coming years. Whether this optimism proves accurate will depend on how the global market stabilizes and how quickly these tech giants can pivot to public offerings or other liquidity events.