NAV Discount

A fund's net asset value (NAV) is what the sponsor says its holdings are worth. The NAV discount is the difference between that figure and what a buyer will actually pay for a stake in a secondary sale, expressed as a percentage. A stake marked at 100 that trades at 87 sold at a 13-point discount to NAV.

The discount exists because a secondary buyer is taking on illiquidity, a blind pool of assets it doesn't control, and years of uncertainty about timing, and it prices all of that into its bid. The size of the discount varies by fund vintage and strategy, and it is one of the more direct signals of how the market views a sponsor's marks against what buyers will actually pay.

How it shows up in a private equity fund's life

The NAV discount is not one number that applies everywhere; it is a price that gets set fresh every time a stake changes hands, and it shows up in three distinct situations:

• LP-led secondary sales. A limited partner sells its interest in a fund to another investor. The discount is simply the negotiated price divided by the fund's most recent reported NAV.
• GP-led continuation vehicles. A sponsor moves one or more portfolio companies into a new vehicle so existing investors can cash out while others roll forward. A third-party fairness opinion typically sets the transfer price, and the discount (or premium) to NAV is the headline number investors and their advisers scrutinize.
• NAV lending. A lender advances cash against a fund's portfolio without a sale taking place at all. There is no transaction price, so no discount gets set. That is precisely the point of a NAV loan, and precisely what critics flag: the marks backing the loan go untested.

Who uses it, and for what decisions

• Secondary buyers use the prevailing discount to size their bids, and adjust it up or down for a specific fund's vintage, sector concentration, and how recently its marks were updated.
• Limited partners weigh the discount against their own need for liquidity: accepting an 87-cents-on-the-dollar sale is the explicit cost of getting cash now instead of waiting for a real exit.
• General partners read the discount as a signal of whether the market believes their marks, and weigh it against the running cost of alternatives like a NAV loan when deciding how to generate distributions.
• NAV lenders build the discount into their loan-to-value covenants as a cushion, since it approximates what the collateral would actually fetch if it had to be sold to repay the loan.
• LP advisory committees and secondary advisers rely on the discount (via a fairness opinion) to judge whether a GP-led continuation vehicle's pricing is fair to the investors being cashed out.
• Data providers such as Jefferies, Campbell Lutyens, and Evercore publish periodic secondary-market pricing surveys that set the benchmark discount the rest of the market prices against.

Where PE Presswire has covered it

“Jefferies found average LP portfolio pricing fell to 87% of net asset value in 2025. That's a real discount to the marks funds were carrying. Selling a stake secondhand means accepting that discount is real.”

“Secondary-market buyers already ask for discounts to net asset value to compensate for the market's illiquidity, and they have less reason to narrow that gap when a risk-free Treasury pays more.”

“LP-led and GP-led secondary sales split almost evenly as institutional investors turn to secondhand fund trades to manufacture the liquidity a slow M&A and IPO market won't provide.”