Glossary · Fund life

What is NAV?

Net asset value, or NAV, is a fund’s assets minus its liabilities. In private funds it is usually reported quarterly and rests on the manager’s valuations.

In practice

NAV appears in quarterly capital account statements and financial statements, and in open-ended funds it sets the price for subscriptions and redemptions. Valuations are typically prepared by the manager under a fair value policy, sometimes reviewed by an administrator or auditor. It is often confused with an investor’s capital account balance, which is that investor’s share of NAV.

An example

Round numbers, not a real fund

Say a fund owns investments valued at $900 million and has $100 million of borrowing. Its NAV is $800 million.

Why it matters

It is the number investors’ statements and fees are often built on, and it is an estimate until an asset is actually sold.

In the news

Related terms

Fair valueFair value is what an asset would fetch in an orderly sale between willing buyers and sellers on the measurement day. Accounting standards require funds to report it.
RVPIRVPI, residual value to paid-in capital, divides the value of what a fund still holds by the money investors paid in. It is the unrealized part of the return.
TVPITVPI, total value to paid-in capital, adds the cash a fund has already returned to the value it still holds, then divides by the money investors paid in.
Fund administratorA fund administrator is an independent firm that keeps a fund’s books, calculates its net asset value, processes capital calls and distributions, and handles investor reporting.
NAV loanA NAV loan is borrowing by a fund against the value of the investments it already owns, rather than against investors’ unfunded commitments.

The terms, in the news each morning.

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