Private Equity Fund Valuation
As previously mentioned in the context of monitoring, it is fair to say that there is a trade-off in terms of costs and benefits to private equity fund valuation. This trade-off also exists between the valuation's level of precision (i.e., attempt to minimize errors) and timeliness.
When discerning the value of private equity funds, it is necessary to differentiate among the following concepts:
In this chapter, we describe the three main approaches employed to value private equity funds: the net asset value (NAV) approach, the internal rate of return (IRR) approach, and the economic value approach.
12.1 NET ASSET VALUE (NAV)
Limited partnership shares have traditionally been valued by multiplying the NAV of the fund by the percentage of shares owned in the fund. In private equity, the NAV is often referred to as a fund's residual value, as it represents the value of all investments ...