NAV (net asset value)

The formula

Fund NAV = fund assets − fund liabilities; an LP's NAV is their closing capital account balance

In private markets both sides of that subtraction are estimates. Public-market NAV is observed; here it is produced by the manager, usually quarterly, usually with a lag of one to two months.

A worked example

A fund reports a 31 March NAV in mid-June. An LP pulling a portfolio view on 30 June is therefore holding a mark that is three months old. If that LP paid a €300,000 capital call in May and the report adds it to the March NAV without saying so, the position looks like it grew by €300,000 in value. It did not — the money simply moved.

The comparisons people search for

Private markets NAV vs mutual fund NAV

A mutual fund strikes NAV daily from observable closing prices, and you can transact at it. A private fund NAV is a quarterly estimate of illiquid holdings, you cannot transact at it, and it is the manager's opinion supported by a valuation policy. Same three letters, very different object.

NAV vs commitment vs paid-in

Commitment is what an LP has agreed to invest, paid-in is what has actually been called, and NAV is what the resulting position is currently marked at. All three routinely appear on the same statement and none of them substitutes for another.

The stale NAV problem

Reporting a position at a lagged NAV while including cashflows right up to today mixes two different as-of dates in one number. It is the single most common reason two performance figures on the same position diverge, and it is a reporting choice rather than a data error.

NAV vs fair value

Under ASC 820 and IFRS 13 the holdings behind NAV are carried at fair value, so in principle they are the same thing. In practice NAV is the reported line item and fair value is the measurement standard it is supposed to meet, and the gap between them is what a valuation policy exists to govern.

Worth knowing

• Typically struck quarterly, delivered 45 to 90 days after the period end.
• The residual value in TVPI and RVPI is this number — both inherit its staleness.
• An LP's share of NAV is their capital account balance, not a simple pro-rata of fund NAV.
• NAV-based lending has made the figure a borrowing base, which raises the stakes on how it is struck.