Three numbers that look alike, the portfolio value, the fund NAV and the limited partners' NAV, and the bridge from each to the next, with the carry accrual that separates the last two.
The NAV of a private equity fund is the fair value of its investments plus its cash and other assets, minus everything it owes: the subscription line, payables and accruals. On an illustrative $400m fund holding portfolio companies worth $430m, that gives a fund NAV of $417.0m, and after $27.4m of accrued carried interest the limited partners' share is $389.6m.
Worked in full in The Private Equity Fund Controller Playbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Most confusion about NAV comes from three numbers that look alike: the value of the portfolio, the NAV of the fund, and the NAV that belongs to the limited partners. They differ by the fund's net liabilities and by the carry the general partner would receive on a liquidation at that NAV. A controller reports all three and can bridge from each to the next.
A buyout fund with $400m of commitments is valued at 30 September 2025. It has called $320m and distributed $40m. Its five portfolio companies cost $300m and are carried at a fair value of $430m. The agreement charges carry at 20 per cent over an 8 per cent preferred return with a full catch-up, on a whole-of-fund basis.
| Line | $m |
|---|---|
| Investments at fair value (cost 300.0) | 430.0 |
| Cash | 6.5 |
| Dividend receivable | 1.0 |
| Other assets | 0.5 |
| Total assets | 438.0 |
| Subscription line drawn | 18.0 |
| Management fee payable | 2.0 |
| Accrued expenses | 0.8 |
| Interest payable | 0.2 |
| Total liabilities | 21.0 |
| Net asset value | 417.0 |
NAV = investments at fair value + cash + receivables + other assets − borrowings − payables − accruals
In Excel, with assets in B2:B5 and liabilities in B7:B10:
=SUM(B2:B5)-SUM(B7:B10)
Here: 438.0 − 21.0 = $417.0m. Two things are deliberately absent. Unfunded commitments, $80m, are not an asset of the fund: they are a promise by the investors and sit off the balance sheet. And the carried interest is not deducted at this line, because in most partnership structures the accrued carry is an allocation within partners' capital, not a liability to a third party.
The same NAV has to be reachable from last quarter's closing number through the quarter's movements. If the two routes disagree, one of them contains an error. This is the build-up from nothing; the close-level control, bridging a draft NAV to a corrected one by two independent paths, is covered in why a close needs two routes to the same NAV.
| Movement | $m |
|---|---|
| NAV at 30 June 2025 | 382.9 |
| Capital contributions | 20.0 |
| Distributions | −15.0 |
| Dividend income | 2.0 |
| Management fee | −2.0 |
| Fund expenses | −0.6 |
| Interest on the subscription line | −0.3 |
| Net realised gain | 12.0 |
| Change in unrealised gain | 18.0 |
| NAV at 30 September 2025 | 417.0 |
Net investment income is negative, −$0.9m, which is normal for a buyout fund: fees and expenses exceed the occasional dividend, and the return arrives through realised and unrealised gains. The quarter added $34.1m of NAV, but only $29.1m of it was performance; the other $5.0m was net capital flowing in.
The accrued carry is found by liquidating the fund on paper at its NAV and running the waterfall. Investors have paid in $320m and would hold $40m of distributions plus $417.0m of NAV: total value $457.0m and a profit of $137.0m. The 8 per cent preferred return, compounded on each contribution and reduced by each distribution, comes to $60.7m. The catch-up completes once profit reaches 60.7 ÷ 0.8 = $75.8m, so at $137.0m the general partner is entitled to 20 per cent of the whole profit: $27.4m.
| Measure | $m |
|---|---|
| Portfolio at fair value | 430.0 |
| Less net liabilities | −13.0 |
| Fund NAV | 417.0 |
| Less accrued carried interest | −27.4 |
| NAV attributable to limited partners | 389.6 |
An investor with a $40m commitment, 10.0 per cent of the fund, holds 10 per cent of the LP NAV if fees and expenses fell evenly: $39.0m, not the $41.7m that 10 per cent of the gross fund NAV suggests. Its capital account statement should show that figure, with $32.0m paid in, $4.0m distributed and $8.0m still unfunded. Where investors pay different fees, the split runs through each capital account rather than a single percentage; the reconciliation is in how to reconcile a private fund capital account.
Because carry sits between the fund NAV and the LP NAV, the two do not move together. A change in portfolio value passes one for one into the fund NAV. Only 80 per cent of it reaches the investors while the catch-up is complete; inside the catch-up band the carry accrual absorbs all of it, and below the preferred return the investors bear it in full.
| Portfolio change | Portfolio | Fund NAV | Accrued carry | LP NAV | LP NAV change |
|---|---|---|---|---|---|
| −20% | 344.0 | 331.0 | 0.0 | 331.0 | −58.6 |
| −10% | 387.0 | 374.0 | 18.8 | 355.2 | −34.4 |
| 0% | 430.0 | 417.0 | 27.4 | 389.6 | 0.0 |
| +10% | 473.0 | 460.0 | 36.0 | 424.0 | 34.4 |
| +20% | 516.0 | 503.0 | 44.6 | 458.4 | 68.8 |
At a 20 per cent markdown the profit, $51.0m, no longer covers the $60.7m preferred return, the whole accrual reverses and the investors' NAV falls by $58.6m on an $86.0m portfolio loss. The general partner's accrual absorbs the rest. This is why the carry accrual is the most volatile line in a quarterly close, and why it is computed every quarter rather than at exit; the method is set out in how to calculate accrued carried interest.
Report the bridge, not just the number. Portfolio value, fund NAV and LP NAV are all legitimate, and an investor comparing statements will meet all three. A one-line bridge from each to the next stops the question before it is asked.
Compute NAV twice, from the balance sheet and from the roll-forward, and require them to agree. Then liquidate the fund through the waterfall at that NAV to find the carry, and report the LP NAV net of it. The balance sheet, the roll-forward and the capital account tie-out for a full quarter are in the free workbook for this case.
From the investors' NAV, yes; from the fund's total NAV, usually not, because accrued carry is an allocation within partners' capital rather than a liability. In the worked case the fund NAV is $417.0m and the NAV attributable to limited partners is $389.6m after $27.4m of accrued carry. Statements should show both and the bridge between them.
No. Unfunded commitments are the investors' obligation to contribute in future, not an asset of the fund. In the worked case $80m remains undrawn and appears nowhere in the $417.0m NAV. It belongs in the capital account statement and in an investor's own liquidity planning, alongside NAV but never inside it.
The drawn balance is a liability and reduces NAV until it is repaid with called capital. Here $18.0m is drawn, more than the whole $13.0m gap between a $430.0m portfolio and a $417.0m NAV, because $8.0m of cash and other assets offsets part of the liabilities. When the fund calls capital to repay the line, NAV rises by the contribution and the liability falls away, so performance is unchanged.
This article is one calculation from The Private Equity Fund Controller Playbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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