Net Asset Value

Net Asset Value is the value of all assets minus liabilities. For a fund, it shows what the held investments are worth in total after deducting debt. It serves as a benchmark for what the shares in the fund or company are worth. That is precisely where the practical difficulty lies: unlisted holdings have no market price, so valuation rests on multiples of comparable companies, discounted cash flow models or the price of the last financing round, and therefore depends on the manager's judgement.

Industry valuation standards aim to narrow that discretion, and the investor advisory committee is involved in material questions. For investors it follows that a high reported value says less than distributions actually paid, which is why the ratio of distributions to paid-in capital is always considered alongside it. In company valuation the term is also used for net asset value in the sense of substance value, which is most informative for real estate and holding companies.

In practice the net asset value is reported per unit by dividing the total value by the number of units outstanding. In private equity funds it rests on valuations of unlisted holdings measured at fair value under IFRS 13 where IFRS is the applicable framework, which leaves room for judgement. Interests in closed-end funds regularly trade in the secondary market at a discount to the last reported value, because buyers price in valuation uncertainty and the remaining fund life. When comparing two funds it therefore matters which reporting date and which method were used.