Net Asset Value (NAV)
Private Equity glossary · Private Equity Fundamentals
Definition
Fair value of fund investments at a point in time, calculated under ASC 820 / IFRS 13 fair-value principles. For PE funds, NAV is GP-estimated using a hierarchy: recent transaction or financing (Level 1), trading comparables and precedent transactions (Level 2), or DCF (Level 3). LPs scrutinize NAV because (i) it drives RVPI and unrealized portion of TVPI, both inputs to fundraising marketing; (ii) it is a known source of mark-up bias in the J-curve recovery period and pre-fundraising windows; (iii) it is the reference price for LP secondary transactions, with typical discounts of 3-30% to reported NAV depending on strategy and vintage.
Net Asset Value (NAV) in plain English
NAV is a fund's best honest estimate of what all its investments are worth on a given day. That's easy for something publicly traded (just check today's price), but private-equity funds own companies that don't trade on any exchange, so the fund manager has to estimate the value — using a recent sale price if there was one, comparisons to similar companies, or a financial model. Investors watch these estimates closely because the manager has a subtle incentive to nudge them up — a rosier number looks better when raising the next fund. It matters in the real world too: when an investor wants to sell their stake early, the price is usually set at a discount of anywhere from 3% to 30% below the fund's reported NAV.
Also called: NAV
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