EliminatingtheNAVProbleminPrivateEquity
Traditional private equity relies heavily on GP-reported Net Asset Values (NAVs), which are often subjective, lagged, and prone to distortion, particularly in illiquid or volatile markets. These valuation gaps introduce tracking error, governance friction, mispriced secondaries, and denominator-effect challenges that hinder allocators’ ability to rebalance portfolios with confidence. As highlighted in the paper, a significant portion of LPs believe NAVs are overstated during stress periods, delaying critical allocation decisions and obscuring true economic performance.
This insight paper outlines a structural alternative built on $1 par pricing, full non-discretionary cash sweeps, and return harmonization. By eliminating interim NAV marks entirely, the model shifts focus from paper IRRs to realized DPI and yield, reduces gating and valuation disputes, simplifies audits, and improves secondary pricing by anchoring transactions to par and yield rather than subjective estimates. The result is a cleaner, more transparent, and more aligned framework for evergreen private equity that replaces valuation noise with direct, realized performance signals.