We believe traditional private equity structures relying on Net Asset Values (NAVs) create misalignment, obscure true performance, and introduce governance challenges—especially in volatile markets. This paper presents a structural alternative: a $1 par unit model with no NAV reporting, where all distributable cash is swept to investors. By eliminating paper gains and focusing on realized outcomes, this approach enhances transparency, alignment, and liquidity.
Instead of subjective NAV marks, investors transact at a fixed $1 price and receive regular cash distributions based on income and realized gains. This model prevents NAV manipulation, reduces bid-ask spreads in secondaries, and simplifies portfolio rebalancing by removing denominator effects. It also streamlines fiduciary oversight by eliminating valuation disputes, simplifying audits, and aligning carry with realized returns.
We see strong applicability in lower mid-market PE, income-generating secondaries, and pension plan liquidity sleeves, while acknowledging this structure is less suited for long-duration, back-ended strategies like venture capital. To adopt this approach, allocators can start with income-focused mandates, revise benchmarking toward cash-based metrics like DPI and yield, and engage GPs on sidecar or dedicated fund structures. For institutions seeking clarity, governance simplicity, and true economic returns, the $1 par + cash sweep model offers a compelling alternative to NAV-based private equity.