Price Discovery

Price discovery is what happens when an asset is actually put in front of buyers and a real transaction price comes out the other end. In private equity, that mostly happens through a sale: a portfolio company changes hands, or an LP sells its fund stake in a secondary transaction, and the price paid becomes public (or at least known to the parties) information.

Between sales, a fund's holdings are marked at values the sponsor itself sets, subject to audit but never tested by an actual buyer. Deals that avoid a sale, like a NAV loan borrowed against those marks, defer price discovery rather than replace it. The mark still eventually meets a market, whether at the loan's maturity or the fund's next real exit.