Net asset value (NAV) is a fund’s total assets minus its liabilities, usually expressed per share. In listed markets NAV is a reference point that prices orbit; in non-traded alternatives it is the price — the value at which investors subscribe, and the basis on which they redeem.
How NAV works in non-traded products
The arithmetic is universal: portfolio value plus other assets, minus debt and liabilities, divided by shares outstanding. What differs in alternatives is where “portfolio value” comes from. Private assets have no closing prices, so NAV rests on fair valuation: appraisals for real estate (with independent valuation advisors supporting sponsor-published values in NAV REITs), models and third-party marks for private loans in BDCs and interval funds, and board-approved procedures over all of it. Perpetual products strike NAV monthly (some daily), publish it, and transact at a NAV-based transaction price for both new subscriptions and repurchases.
That pricing role is why NAV governance deserves attention it rarely gets in traditional funds. Because investors buy and sell at the mark, valuation errors don’t just misreport performance — they transfer wealth between entering, exiting, and remaining shareholders. The inputs worth reading in filings: capitalization and discount rate assumptions (real estate values are extraordinarily sensitive to them — the published sensitivity analysis quantifies how much), the share of the portfolio valued by third parties versus the sponsor, and how quickly marks moved when comparable public assets repriced.
The honest framing on smoothness: appraisal-based NAVs lag and dampen market moves in both directions. Part of that reflects genuine differences between private and public pricing; part is measurement artifact. The 2022–2024 rate cycle was the live demonstration — private real estate NAVs adjusted downward over quarters while listed REITs repriced in weeks — and the gap between a product’s NAV and where comparable assets trade is exactly the wedge that discounted third-party tender offers exploit and that redemption queues express. NAV is a considered estimate, not a quote; treating it as either gospel or fiction misreads what it is.
FAQ
What is NAV in simple terms?
What the fund owns minus what it owes, per share — the fund’s stated value, and in non-traded products, the actual price for buying in and cashing out.
How is NAV calculated for non-traded REITs?
Property values from appraisal processes (typically overseen by independent valuation firms), plus other assets, minus debt and liabilities, divided by shares — struck monthly and published as the basis for that month’s transaction price.
Why doesn't NAV move like the stock market?
Appraisal-based values update on valuation cycles rather than trading sentiment, so they’re smoother and slower in both directions — partly genuine, partly a measurement lag worth understanding.
Related terms
Transaction Price · Independent Valuation Advisor · Non-Traded REIT · Sensitivity Analysis · Redemption Program
Educational content only; not investment, tax, or legal advice. Consult qualified professionals regarding your specific circumstances.
