Net asset value

The stated value of a fund's holdings less its liabilities, usually expressed per unit. In illiquid vehicles it is produced by a valuation process rather than by trading.

Example

A private fund reporting a quarterly net asset value based on valuations of holdings that have not been sold.

Important

A value produced at intervals by a process cannot move jaggedly, so it will look less volatile than a continuously priced asset. That is unobserved volatility, not low volatility.

Related terms

• Valuation mark — The value an asset is currently carried at - a last traded price in public markets, or a valuation produced by a process in private ones.
• Mark to market — Valuing an asset at what it would sell for right now, rather than at what you originally paid for it.
• Unrealised gain — The difference between what an asset is currently marked at and its cost basis, where no sale has taken place.

Lessons that explain it

• A multiple without time and cash tells you half the story — Portfolio and fund returns are described with TVPI, DPI and IRR. Each answers a different question: total value, cash actually returned, and return per year. Reading them together avoids common misinterpretations. (11 min)
• A fund is a wrapper, not an asset class of its own — Buying a fund buys a proportional claim on whatever it holds. Until you have opened the holdings list, the name on the ticket tells you almost nothing about what you own. (9 min)
• Two prices: what the holdings are worth, and what somebody will pay — Net asset value is an accounting fact struck at a moment. An exchange-traded fund's market price is a live opinion. The gap between them is sometimes a mispricing and sometimes the more honest number. (12 min)
• The entry multiple is set by auctions, and the fund's value by its own appraisals — Buyouts are priced as a multiple of earnings in competitive sales, and between purchase and exit the fund's value rests on appraisals that move far more smoothly than markets. (11 min)
• The liquidity premium, and the three ways it fails to arrive — Illiquidity is supposed to pay you extra. Sometimes it does. Here is how to check whether the premium you were promised actually reached you. (14 min)
• A fund's value is mostly an opinion until something is sold — Venture funds report a net asset value built on the GP's own marks. Only distributions are cash, which is why DPI and TVPI tell very different stories. (11 min)

All 578 terms in the Investing glossary