What Is the Mark Trying to Say?
Unrealized NAV is an estimate of value at a reporting date. Round terms, business results, comparable firms and signs of loss all inform it. A change can reflect company progress or a different valuation method.
The AICPA valuation guide overview describes fair-value measurement for investment-company holdings. Evidence behind the estimate helps the reader understand how the value was formed.
The guide was developed by a PE/VC task force and includes portfolio-company valuation guidance for investment companies within ASC 946.
The Companies Behind NAV
Two funds can report the same NAV and carry very different levels of uncertainty. One may hold many recently financed companies. The other may depend on an old mark for a single large position.
Cost and realized proceeds describe cash already invested and returned. Fair value is a current estimate. Ownership and share class connect the headline company value to the fund's actual claim, explaining differences between the two.
What Belongs in the Company Schedule
| Field | Why it matters |
|---|---|
| Invested cost | Shows the cash at risk and the basis for gross MOIC |
| Current fair value | Shows the manager's present estimate |
| Realized proceeds | Separates cash received from value still at risk |
| Last financing date and terms | Shows how current the price evidence is and whether the round was structured |
| Ownership and share class | Connects headline company value to actual fund proceeds |
| Valuation method | Explains whether the mark uses a transaction, comparison, model, or blended view |
What Changed During the Quarter?
The movement from opening to closing NAV reflects new capital, distributions and changes in company marks. A quarterly bridge separates those causes.
A higher mark can come from an outside-led round, business progress or rising prices for similar firms. The same change in value can therefore rest on different evidence.
Concentration Determines How Much Judgment Matters
If the largest company represents 40% of fund NAV, a 25% reduction in that position cuts total NAV by 10%. The arithmetic turns a general valuation concern into a fund-level risk.
A large position's share of NAV reveals its weight in the fund. Evidence behind its mark matters more when that single estimate can change the overall result.
Cash and Estimates Describe Different Value
Company schedules usually show gross value before fund economics, while LP statements show a net result after fees and carry. Both views are useful when the labels are clear and the reader can reconcile them.
The same care is needed with performance multiples. A 2.0x TVPI made up of 1.5x DPI and 0.5x RVPI is largely realized. A 2.0x TVPI with no distributions remains entirely dependent on future exits.
Questions for the Quarterly Review
- Which marks changed, and what evidence explains each movement?
- How old is the price, particularly for companies without recent financing?
- Which positions and sectors account for the largest share of NAV?
- How much value has become cash, and how much remains in RVPI?
- What financing, exit, milestone or risk could change the mark next?
A good report makes uncertainty visible. It shows the LP where that uncertainty sits and how much of the result depends on it.
How the Metrics Connect
A $100 million fund with $30 million distributed and $170 million still unrealized reports 0.3x DPI and 1.7x RVPI, adding to 2.0x TVPI. Fees and carry can lower the LP's result. Reporting policy can also affect the mark.
This reconciliation tells the reader where the reported value lives. Only $30 million has returned as cash; the remaining $170 million still depends on company outcomes and future liquidity.
That distinction also fits AICPA's description of its PE/VC valuation guide. The guide addresses the measurement of fair value for financial reporting purposes for investment-company portfolio investments, including entities within ASC 946.
The Evidence Behind Major Marks
If one position moves from $40 million to $80 million, it adds 0.4x TVPI to a $100 million fund. The explanation for that one mark is material to the assessment of the entire fund.
Distributions and unrealized value explain the separate DPI and RVPI measures that add to TVPI.
Unrealized Value Reporting Bridge
Realized cash and unrealized value together make up total reported value.
View bridge data and assumptions
| Metric | Amount | Multiple on $100M fund |
|---|---|---|
| DPI | $30M distributed | 0.3x |
| RVPI | $170M unrealized | 1.7x |
| TVPI | $200M total value | 2.0x |
The Fund's Stake Can Change
A new financing may support the company valuation while diluting the fund or placing a senior security ahead of its shares. The fund's own stake can therefore change even when the headline value holds.
The Quarterly Roll-Forward
New investment, cash paid out, realized gains or losses and changes in company marks connect prior NAV with the current report. Exchange-rate effects and other large adjustments explain the remaining movement.
The manager can then explain the largest movements company by company. A new financing led by an outside investor provides different evidence from a model change based on public comparables. A flat mark may also deserve explanation when the company missed its plan or consumed substantial cash.
The roll-forward reveals where judgment entered the result. That allows the LP to separate operating progress from market movement and actual liquidity.
Frequently Asked Questions
Can unrealized value be reported at cost?
Cost may be informative soon after investment when little new evidence exists. As time passes, current fair-value evidence becomes more relevant than the original purchase price.
Why do LPs care about RVPI?
RVPI remains unrealized. It can become DPI, rise, fall or disappear depending on company outcomes and the exit market.