Performance Metrics
What is Valuation?
Valuation in private markets is the process of estimating the fair value of an investment — a portfolio company or fund stake — that does not have a readily observable market price.
Because private assets are not publicly traded, GPs must estimate the value of their portfolio companies each quarter using methodologies such as comparable company analysis, discounted cash flow (DCF), or recent transaction prices. These estimates form the basis of the fund's NAV and TVPI.
LPs and auditors scrutinize valuations closely because the GP has some discretion in methodology and assumptions. ILPA and IPEV (International Private Equity and Venture Capital Valuation Board) publish guidelines to standardize fair-value estimation.
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