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NAV

Also known as Net Asset Value, Fund NAV, Residual NAV

Mikael Andersson
Mikael Andersson
VC Analyst · Updated

NAV (net asset value) is a fund's assets at fair value minus its liabilities at a reporting date. For a private equity or venture fund, NAV equals the fair value of unrealized portfolio holdings plus uncalled-but-committed cash and receivables, minus payables and accrued expenses. The IPEV Valuation Guidelines define the fair value standard GPs use.

Formula

NAV = Fair Value of Investments + Cash and Receivables - Liabilities
Fair Value of Investments
Mark-to-fair-value of each unrealized portfolio company per IPEV
Cash and Receivables
Uninvested cash, distributions receivable, and accrued income
Liabilities
Accrued management fees, fund expenses, and other payables

In depth

NAV is the residual unrealized half of fund value. For a fund mid-life, it dominates total value: a year-five venture fund typically has 20% to 40% DPI and 60% to 80% of total value still sitting in NAV. That makes the GP's mark policy the largest single input to reported TVPI.

The IPEV Valuation Guidelines, endorsed by Invest Europe, BVCA, ILPA, and over 50 national associations, establish the fair value standard. Fair value is "the price that would be received to sell an asset... in an orderly transaction between market participants at the measurement date" (IFRS 13 and ASC 820 alignment). Acceptable techniques include the price of a recent investment, market multiples of comparables, DCF, and net asset value of the underlying business itself.

Mark policies vary in conservatism. Some GPs hold the last-round price for 12 months unless there is a triggering event. Others mark up to a public-comp-driven multiple at every quarter. The reported NAV is identical in concept but very different in level depending on which approach is used.

Why it matters

NAV is the most-debated number on every quarterly LP letter. It drives TVPI, it drives IRR, it drives the GP's ability to raise the next fund. It is also the most subjective. LPs benchmark NAV against same-vintage Cambridge Associates pooled data, look at the gap between NAV and DPI to detect mark inflation, and demand audit trails for write-ups on unfunded positions. When a fund's NAV exits look optimistic at year five, it almost always converts to a write-down by year seven.

Worked example

A $50M fund three years in:

PositionCostLast round markCurrent fair valueNote
Company A (Series C)$4M$20M$20MNo change, last round 2025
Company B (Series B)$3M$12M$7MComp multiples halved
Company C (Seed)$1M$1M$0Wound down
Cash and other$5MUninvested capital
Liabilities-$1MAccrued fees
NAV = $20M + $7M + $0 + $5M - $1M = $31M

Fund-level NAV of $31M on $50M committed. If $10M has been distributed, TVPI = ($10M + $31M) / $50M = 0.82x. The fund is still in the J-curve trough.

Frequently asked

How do GPs actually mark a private company's NAV?

Under the IPEV Valuation Guidelines, GPs estimate fair value using the price of a recent investment, market multiples of comparable public companies, discounted cash flow, or industry-specific benchmarks. For a company that closed a Series B at $100M post-money six months ago and has not raised since, the typical mark is the last-round price adjusted for any subsequent operating performance signals.

How often is NAV reported to LPs?

Quarterly is industry standard, with audited annual figures. Cambridge Associates and Invest Europe both build their benchmarks on the quarterly NAV stream that GPs report through their financial statements. AIFMD requires independent valuation for European funds.

Why does NAV move when no rounds have happened?

Fair value is not last-round value frozen forever. IPEV allows and expects markdowns when operating performance, comparable trading multiples, or material events suggest the last round's price is stale. In 2022-2023, public software multiples compressed roughly 50% and many funds wrote down late-stage marks even without a priced down round.

How does NAV affect TVPI and IRR?

Residual NAV is the unrealized half of TVPI: TVPI = DPI + (NAV / Paid-In). It is also the terminal cash flow in the IRR calculation. A 25% NAV markdown on a fund where unrealized value is 60% of total value drops TVPI by about 0.15x and can pull IRR down 200 to 400 basis points.

Sources & further reading