NAV valuation in private funds involves two steps: valuing the fund’s investments at fair value as of the measurement date, then building fund NAV by incorporating cash, receivables, liabilities, and accruals. The phrase sounds technical, but most operational pain comes from timing, inputs, and controls, not from the math.
People also use “NAV model” and “net asset valuation model” to mean different things. Some mean a close model that turns accounting and valuation inputs into fund NAV and investor allocations. Others refer to an asset-based valuation method for a company (adjusted net assets). If you do not separate these meanings, you end up with confusing processes and mismatched expectations.
This article focuses on private fund NAV valuation and the fund NAV model: methods at a high level, how to structure the model, the QA checks that prevent reruns, and a simple worked example.
Note: this is general information. Your fund documents and valuation policy govern the final methodology and approvals.
Key takeaways
- NAV valuation starts with fair value, then becomes a close process. Fair value is market-based and should use observable inputs when available, then the close adds liabilities, accruals, and cut-off discipline.
- A NAV model is mostly a data and controls problem. If dates, FX sources, and mappings are consistent, the calculation is straightforward.
- QA checks reduce reruns and audit friction. Tie outs to the trial balance and investor totals are what make the model reliable, not extra formatting.
- Net asset valuation of a company is a different intent. It is an asset-based company valuation concept, not the same thing as a private fund NAV close.
One source of truth for NAV reporting
Unified accounting and investor reporting for fund administrators.
What “NAV valuation” means in private funds
At the fund level, NAV is the fund’s net value on a specific date: total assets minus total liabilities. In private funds, “NAV valuation” often becomes shorthand for the most judgment-heavy part of that equation, the fair value of illiquid investments.
Two practical points matter for fund operations:
First, fair value is a market-based concept. Under both IFRS 13 and ASC 820, fair value measurement is framed around current market conditions and market participants, not the reporting entity’s personal view. ASC 820 guidance emphasizes maximizing observable inputs and minimizing unobservable inputs, and notes that fair value is market-based rather than entity-specific.
Second, the valuation result is only one input to NAV. Even with perfect valuation marks, your NAV model can still be wrong if cash is unreconciled, fees are misaccrued, financing balances are stale, or capital activity is posted late.
That is why a strong NAV valuation approach includes governance and evidence, such as valuation memos, approvals, and a clear link from fair value marks into the NAV build and investor reporting.
Disambiguation: NAV valuation vs net asset valuation of a company
These terms get mixed in search results and in internal conversations. Separating them helps you build the right model and set the right expectations.
| Topic | What it refers to | Typical user intent |
| NAV valuation (fund) | Valuing the fund’s investments at fair value and producing fund NAV for reporting and allocations | Close process, reporting pack, controls, audit support |
| Net asset valuation of a company | An asset-based corporate valuation approach (often “adjusted net assets”) | Corporate valuation, deal analysis, balance sheet-based valuation |
This article is fund-focused. The company concept appears only for disambiguation and in the FAQ.
NAV valuation methods used in private funds
This is a high-level overview. The goal is to understand what drives the number and what you must document, not to replace a full valuation handbook.
Market-based inputs, when available
For liquid assets, fair value may be based on observable market data. Fair value hierarchy language is useful for thinking about this because it focuses on the observability of inputs:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
- Level 2 inputs are observable inputs other than Level 1 quoted prices, either directly or indirectly.
- Level 3 inputs are unobservable inputs.
Operationally, this means your NAV valuation support should clearly distinguish between “priced from market data” and “modeled with assumptions,” because that affects review, disclosures, and the level of scrutiny.
Valuing illiquid private equity investments
For private equity and other illiquid holdings, the valuation techniques typically sit under one of the three approaches that IFRS 13 describes: market approach, income approach, and cost approach.
- Market approach (multiples and comparable transactions). The market approach uses prices and information from market transactions involving identical or comparable assets, such as comparable company multiples or observed transaction prices.
- Income approach (discounted cash flow and related models). The income approach converts future amounts (cash flows, income, and expenses) to a single current amount, often using discounted cash flow methods.
- Cost approach (replacement cost concepts). In practice, cost is more common for certain asset types or early-stage situations, and it is usually considered alongside facts about progress, impairment indicators, and market participant assumptions.
A helpful operational anchor: ASC 820 guidance emphasizes that the valuation technique should use inputs that market participants would select in the principal (or most advantageous) market, and incorporate observable inputs whenever available.
What changes quarter to quarter
In private equity, the “why did NAV move?” story is often driven by:
- Company performance updates (revenue, margins, cash)
- Changes in comparable multiples
- Discount rates and risk premia assumptions
- Capital structure events (new financing rounds, recapitalizations)
- FX movements if the fund is multi-currency
- Significant events after the measurement date that affect the next period, not the current period (but still require consideration and documentation)
The model should be designed so that these drivers show up as explainable movements, not as unexplained residuals.
Documentation and approvals that keep valuation defensible
The most useful valuation memo is not long. It is clear. It should make it easy for a reviewer to answer:
- What method was used, and why it fits the asset and life cycle stage?
- What inputs moved since last quarter?
- What market data supports those inputs?
- What was approved, by whom, and when?
IFRS educational material highlights that fair value is about estimating an exit price in an orderly transaction between market participants at the measurement date. That framing helps reviewers and auditors focus on whether the valuation is grounded in market participant assumptions and current market conditions.
In practice example: the late valuation memo
A common close scenario: accounting has reconciled cash and booked accruals, and the draft NAV pack is nearly ready. A material portfolio company memo arrives late with a revised multiple or discount rate, and the investment mark changes.
The control that reduces rework is a valuation readiness gate: you do not run final investor allocations until the valuation set is approved and frozen. If you must produce a preliminary pack, label it clearly, keep it internal, and treat the later rerun as a controlled version with an explicit change log.
How to build a fund NAV model (end-to-end)
A fund NAV model is the structure that transforms source data into:
- fund level NAV
- investor allocations and capital accounts
- reporting outputs and tie-outs
It can live in a system, a controlled spreadsheet model, or a reporting layer. The best models do not rely on heroics. They rely on clean inputs, stable structure, and QA checks.
Model inputs: what your model must ingest
Describe inputs in your documentation in plain language, and store them as close evidence:
- Trial balance or general ledger extract. This anchors liabilities, accruals, classifications, and the official accounting balances.
- Holdings and valuation marks. Positions plus fair value marks and a record of exceptions or overrides.
- Cash and bank or custodian activity. Used for reconciliation and cut-off checks.
- Capital activity. Calls, distributions, transfers, subscriptions, redemptions, and effective dates.
- Fee and expense schedules. Fee bases and rates, offsets, expense allocations, side letter adjustments.
- FX rates. A locked period source if multi currency.
- Financing balances. Subscription lines, NAV facilities, and interest accrual support if applicable.
Model structure: recommended modules and source of truth
A modular design makes the model easier to review and less fragile when something changes.
| Module or tab | Purpose | Source of truth | Key outputs | Primary control check |
| Inputs staging | Load raw files and normalize formats | GL, bank, holdings, investor ledger | Clean input tables | Row counts, totals match source |
| Holdings and valuation | Store positions and fair value marks | Portfolio system, valuation memos | Investment schedule | Completeness, no duplicates, mark approval |
| Cash reconciliation | Tie book cash to bank and custodian | Bank, custodian, GL | Cash rec and timing log | Reconciled or explained timing items |
| Accruals module | Fees, expenses, financing accruals | GL, fee terms, debt statements | Accrual schedules | Accruals tied to GL accounts, reasonableness vs prior |
| NAV build | Assets minus liabilities | Outputs from above | Fund NAV | Fund NAV ties to TB and balance sheet summary |
| Allocation engine | Allocate NAV changes to investors | Investor ledger and terms | Capital accounts | Investor totals equal fund totals |
| Reporting outputs | Generate NAV pack tables | Model outputs | Pack tables and charts | Output tables tie back to model |
| Checks and exceptions log | Capture breaks and resolutions | Model generated | QA log | All exceptions resolved or approved |
Step-by-step build sequence
Below is a sequence that works for most private funds. Adjust the owners and timing, but keep the dependency logic.
1) Lock the valuation date and FX source for the period.
Everything else depends on this. Fair value measurement is tied to the measurement date, and models break when different tabs use different “as of” dates. ASC 820 also stresses the use of market participant inputs and observable inputs when available, so the FX and pricing sources should be documented for the period.
What breaks: two FX tables or two pricing dates.
Control: one locked FX rate table and a single valuation date parameter.
Artifact: period assumptions page.
2) Load and validate inputs, confirm completeness.
Do not start “fixing” outputs until inputs are validated.
What breaks: missing accounts, missing bank accounts, incomplete holdings files.
Control: input checks on row counts, totals, and required fields.
Artifact: input validation report.
3) Build holdings and valuation summary.
Load marks, map them to holdings, and document which marks are approved. The fair value hierarchy concept can help structure review, because it forces clarity on observable vs unobservable inputs.
What breaks: duplicates, stale marks, overrides without support.
Control: exceptions log that requires resolution and approval.
Artifact: investment schedule with exceptions.
4) Reconcile cash and log timing items.
Cash is the fastest way to uncover missing capital activity and cut off errors.
What breaks: wires in transit, missing postings, wrong dates.
Control: cash reconciliation with a timing items log and owners.
Artifact: signed cash rec and timing log.
5) Calculate accruals and tie to the GL.
Fees and expenses are where “small” errors become recurring.
What breaks: wrong fee base, misapplied rates, missing invoices, financing interest drift.
Control: accrual schedules tied to specific GL accounts and reviewed vs prior period patterns.
Artifact: fee and expense schedules with reviewer sign-off.
6) Compute fund level NAV and tie to the trial balance.
Your NAV build should reconcile to the official accounting totals.
What breaks: mapping errors and classification differences.
Control: TB tie out for assets, liabilities, and NAV.
Artifact: fund NAV tie-out page.
7) Allocate to investors and run tie-outs.
Investor reporting is downstream of fund NAV. ILPA defines NAV reconciliation as the investor’s allocation of total fund balances representing that investor’s interest, which aligns with how your tie-out should work.
What breaks: transfer effective dates, class mapping, and side letter adjustments.
Control: “sum of investors equals fund” check and reasonableness checks for unusual movements.
Artifact: investor allocation tie-out report.
8) Generate the pack and archive evidence.
This is where version control matters.
What breaks: multiple “final” packs, missing support later.
Control: one approval point and one locked release set.
Artifact: final pack, release log, evidence folder.
QA checks and controls: what makes the model reliable
A good NAV model is built for review. That means QA checks are not an extra tab; they are the model’s backbone.
Here is a reusable QA checklist. Each item should have a clear owner and a documented resolution if it breaks.
- Valuation date alignment across inputs. Confirm GL, holdings, marks, cash, and FX are all as of the same measurement date; if not, stop and resolve the mismatch before allocating.
- FX consistency across holdings, GL, and reporting outputs. Use one locked FX table per period; if two sources exist, pick one and rerun the model so all outputs match.
- Holdings completeness. Reconcile holdings counts and totals to the portfolio source; if missing, identify which positions are absent and why.
- Duplicate positions and double counting. Check for duplicates by unique identifiers; if found, fix the mapping rather than netting in outputs.
- Cash reconciliation status. Cash must tie to bank and custodian or be explained by a timing log; unreconciled cash is a release blocker.
- Timing items aging. Review whether timing items are clearing period to period; aged items should be escalated and resolved.
- Investment mark approval status. Every material override or late mark should have documented support and approval; if not, treat it as an exception and do not release.
- Trial balance tie out for assets, liabilities, and NAV. If the NAV pack does not tie to the TB, identify the account mapping issue and correct it before continuing.
- Fee base and rate reasonableness. Compare management fee results to expected terms and prior periods; if it breaks, verify the base definition and side letter adjustments.
- Expense accrual reasonableness. Identify unusual vendors and large accrual swings; if it breaks, confirm cut off and supporting invoices.
- Financing balance and interest tie. Tie subscription line principal and interest accruals to lender statements and GL; if it breaks, rebuild the rollforward and correct the accrual.
- Investor totals equal fund totals. Sum of investor NAV must equal fund NAV; if it breaks, look for transfer issues, class mapping, or allocation rule changes.
- Transfer effective date checks. Transfers should not move economic results into the wrong period; if it breaks, correct effective dates and rerun allocations.
- Change log for reruns and overrides. Every rerun should have a short explanation of what changed; if it breaks, you lose audit trail and internal trust.
- Version control, only one approved final. Ensure the model, pack, and investor statements are labeled with one final version; if it breaks, stop distribution until corrected.
Stop the line criteria: If cash is unreconciled beyond your threshold, marks are unapproved for material holdings, the NAV pack does not tie to the TB, or investor totals do not tie to fund totals, do not release. Fix the break, rerun, and record the change in the close log.
Worked example: simple model flow
Assumptions: one fund, single currency, measurement date is quarter end, two investors with fixed ownership for simplicity.
Fund NAV build
| Component | Amount |
| Investments at fair value | 120,000,000 |
| Cash | 6,000,000 |
| Receivables | 1,000,000 |
| Total assets | 127,000,000 |
| Subscription line (principal) | (8,000,000) |
| Management fee accrual | (900,000) |
| Expenses payable and accruals | (600,000) |
| Total liabilities | (9,500,000) |
| Fund NAV | 117,500,000 |
The NAV model should produce this table directly from source modules, not from manual edits.
Investor allocation tie-out
Assume Investor A owns 60% and Investor B owns 40% of the fund NAV at quarter’s end.
| Investor | Ownership | Allocated NAV |
| Investor A | 60% | 70,500,000 |
| Investor B | 40% | 47,000,000 |
| Total | 100% | 117,500,000 |
The simplest control is the last row: total allocated NAV equals fund NAV. If it does not tie, do not troubleshoot in the final statement output. Go back to allocations, transfers, and mapping.
Common pitfalls in NAV valuation models (and how to avoid them)
Late valuation changes force repeated reruns
Symptom: NAV pack keeps changing, and teams cannot agree on which version is final.
Cause: valuation marks arrive after allocations or reporting outputs are produced.
Control: valuation readiness gate and explicit version control, with a change log that states what moved and why.
Stale marks or unapproved overrides
Symptom: the investment schedule shows a mark that does not match the approved memo or uses last quarter’s value.
Cause: manual overrides or stale feeds.
Control: exception log that requires support and approval for every override, and a check that every material holding has current period support.
FX inconsistencies break tie-outs
Symptom: fund level NAV ties, but investor level allocations are off by small amounts, or holdings totals drift from GL totals.
Cause: holdings tab uses one FX source, GL uses another, and reports pull from both.
Control: one locked FX table per period, plus a QA check that compares FX translated totals across modules.
In practice example: the “small FX mismatch”
A common scenario is a minor rounding or rate timestamp difference that looks immaterial in isolation but creates an investor tie-out break. The fix is not to force the tie with a plug. The fix is to identify which module is using the wrong FX table and rerun it so the model stays logically consistent.
Fees misapplied due to the wrong base
Symptom: management fee accrual spikes or drops without a clear driver.
Cause: fee base definition is misinterpreted (commitments vs invested capital vs NAV) or side letter adjustments are not applied.
Control: fee schedule stored as a controlled input, plus reasonableness checks vs prior periods and expected step-downs.
Unreconciled cash timing items become permanent
Symptom: timing items appear every close, but no one knows if they clear.
Cause: timing logs are treated as commentary rather than as tracked exceptions with owners.
Control: aging analysis for timing items, with escalation for older items and a requirement that aged items be resolved.
Capital activity posted late or in the wrong period
Symptom: investor statements are wrong even when the fund NAV seems fine.
Cause: postings are delayed, or transfers are applied with incorrect effective dates.
Control: capital activity tie to bank movements and a second person review for transfer effective dates before allocations run.
Allocation leakage: investor totals do not tie to fund totals
Symptom: sum of investor NAV does not equal fund NAV.
Cause: mapping issues, class logic, or transfer timing.
Control: hard stop rule: do not release any statements until the tie-out is clean and explained.
Manual journal entries without support
Symptom: “plug” entries appear to make reports tie.
Cause: pressure to hit deadlines without resolving root cause.
Control: require support for every manual entry and link it to a specific reconciliation or adjustment memo. If it is not supportable, it should not be booked.
Multi-entity consolidation mismatches
Symptom: master feeder totals do not match underlying entity reports.
Cause: inconsistent intercompany eliminations, stale feeder ownership percentages, or different cut-off dates across entities.
Control: standard consolidation checklist and ownership schedule lock per period.
Conflicting “final” versions erode trust
Symptom: different stakeholders quote different NAV numbers.
Cause: reruns without version control and unclear approvals.
Control: one approved release version, with a locked distribution set and archived evidence.
How FundCount supports NAV valuation and modeling
A NAV model works best when accounting, allocations, and reporting outputs tie back to one consistent set of records. FundCount describes its platform as integrating partnership and portfolio data in a general ledger, which supports consolidated views across multi-layer structures.
One platform for fund accounting and investor reporting
Keep NAV, fees, allocations, and statements tied to the same source of truth for cleaner closes.
In practical terms, FundCount capabilities described in its materials can support NAV valuation and modeling workflows in these ways:
- General ledger as an anchor for reconciliations. FundCount describes a multi-currency, multi-book general ledger that supports both IFRS and GAAP accounting, which can help teams keep NAV packs tied to accounting records.
- Combining portfolio and partnership accounting. FundCount’s partnership accounting page highlights combining portfolio accounting and partnership accounting in one system with an integrated real-time general ledger, which aligns with the need to connect valuations, capital activity, and allocations.
- Standardized reporting outputs and extracts. FundCount describes over 70 built-in reports, Power BI integration, and custom reporting options using Excel and data extracts, which can support repeatable NAV pack generation and controlled data pulls for models.
- Report templates and an archive concept. FundCount’s reporting solution highlights adaptable templates and an extensive report encyclopedia, which can help keep reporting structure consistent from period to period.
- Audit trail and controls as part of reporting reality. FundCount’s performance reporting guidance explicitly calls out the importance of audit trail and controls such as approvals and change tracking, which matches the governance needs around reruns and overrides in NAV models.
- Controlled investor delivery. FundCount’s investor portal description emphasizes that data can flow from the accounting engine to investors without manual rekeying and supports bulk personalized statement creation, which can reduce version confusion at distribution time.
Conclusion
NAV valuation in private funds is not only a valuation question. It is a disciplined close process that starts with fair value measurement and ends with a NAV that ties to the trial balance and allocates cleanly to investors. Fair value measurement is market-based and prioritizes observable inputs when available, which is why documentation and consistency matter. If you want fewer reruns and fewer late surprises, focus on model structure, QA checks, and evidence, then lock your final version and move on.
FAQ
What does NAV valuation mean for private funds?
It usually means valuing the fund’s investments at fair value as of the measurement date, then building NAV by incorporating cash, receivables, liabilities, and accruals. IFRS 13 frames fair value as an exit price in an orderly transaction between market participants at the measurement date.
What is the difference between a NAV model and a valuation model?
A valuation model estimates fair value for a specific investment. A fund NAV model combines those valuation outputs with accounting balances, cash, fees, expenses, and allocations to produce fund NAV and investor reporting.
What is included in NAV valuation?
Typically: investments at fair value, cash, receivables, and other assets, minus liabilities such as payables, accrued expenses, fee accruals, and financing. Exact inclusions depend on your policy and fund documents.
How do you value private equity investments for NAV?
At a high level, valuation methods generally align with the market approach, income approach, or cost approach, depending on the asset and facts. IFRS educational material describes these approaches and notes that fair value is market-based, even when observable data is limited.
What QA checks should a NAV model include?
At minimum: date alignment, FX consistency, holdings completeness, cash reconciliation, TB tie out, fee and expense reasonableness, financing tie out, and the investor totals equal fund totals check. For investor reporting, ILPA’s NAV reconciliation framing highlights that investor balances should represent an allocation of total fund balances.
Does subscription line debt affect NAV?
Yes. Subscription line principal and accrued interest are liabilities of the fund, so they reduce NAV when included in the liabilities section.
Why do investor totals not tie to fund NAV?
Common causes include transfer effective date errors, class mapping issues, side letter adjustments not applied, or capital activity posted late. A strong model treats “sum of investors equals fund” as a release blocker.
What is net asset valuation of a company, and is it the same as fund NAV?
Net asset valuation of a company is an asset based corporate valuation concept, often based on adjusted net assets. It is not the same as producing fund NAV for a private fund close, which is focused on fair value of holdings plus close mechanics and investor allocations.
How often should NAV valuations be updated?
It depends on fund terms and investor expectations. Many private funds report quarterly to investors, and some do monthly internal NAV closes for controls and management reporting.
What evidence do auditors typically expect?
They typically expect valuation support (memos, approvals, observable inputs where available), reconciliation tie-outs to the trial balance, cash reconciliation support, and a clear change log when reruns or overrides occur. ASC 820 guidance emphasizes market participant inputs and maximizing observable inputs, which supports why documentation and consistency are reviewed closely.
