The Execution Based Finance Blind Spot

In the primary market, execution is largely administrative. It is governed by documentation, allocation mechanics, legal process, and capital formation logistics—not by real-time interaction with liquidity.

There is no continuous price discovery, no moment-to-moment variance, and no need for direct market access in the way secondary markets require. As a result, execution in the primary market is treated as a procedural function rather than a dynamic one.

This framing quietly carries over into how many fundamentally driven investors approach the secondary market—and that is the flaw.

Fundamental investors often treat execution in the secondary market as if it were an extension of the primary market: a downstream formality rather than a first-order variable. Once the thesis is formed, execution is assumed to be inevitable. The only remaining concern becomes cost—slippage, impact, fees, or timing around benchmarks such as VWAP.

But the secondary market is not governed by capital formation.

It is governed by variance, liquidity, and temporal price discovery.

Primary-market logic—where conviction and fundamentals dominate—was implicitly applied to secondary-market mechanics, where variance dominates.

The result is that drawdowns are routinely attributed to market behavior or volatility regimes, when in reality they are frequently the consequence of engaging exposure during variance-dominated states.

In short, the industry learned to manage the cost of execution in secondary markets, but not the risk of engagement itself. And that misplacement is at the core of why drawdown persists despite increasingly sophisticated analytics, models, and risk overlays.