NAV Discount

NAV discount is the percentage below net asset value at which a fund's shares or LP interests trade, reflecting illiquidity, uncertainty, or market sentiment.

Discount DriversImpact
IlliquidityClosed-end funds trade at 10% to 30% discount
Uncertain valuationsDifficult to value assets increase discount
Poor performanceUnderperforming funds see wider discounts
Upcoming capital callsUnfunded commitments widen discount
Market conditionsDown markets increase discounts
Manager qualityStrong GPs command narrower discounts
Secondary Market ExamplePricing
Fund NAVAED 100M
LP interest10% ownership = AED 10M NAV
Secondary market bidAED 8.5M (15% discount to NAV)
Discount justificationIlliquidity, J-curve, market uncertainty
Buyer rationaleDiscount compensates for risks
Typical range10% to 25% discount for private real estate funds

Related Terms

Net Asset Value (NAV)NAV DiscountSecondary Market LP Interest Illiquidity DiscountFund Valuation

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