Valuing Private Equity Secondaries in volatile markets can result in a NAV that does not reflect the intrinsic value of the portfolio. Opportunities arise.
NAV versus Intrinsic Value
In calm markets, the reported NAV of a private equity fund is generally accepted as a useful gauge of the intrinsic value of the underlying companies in the portfolio. But what happens when volatility spikes and markets are less predictable?
Volatile markets can delay potential exits resulting in GP-led sales, or create 'forced' LP sellers looking to raise liquidity or de-risk.
At this juncture, seasoned long term private market investors are increasing their time allocated to deal flow sourcing. As informed investors, they recognise that volatile markets can shift the NAV away from intrinsic value, and create interesting opportunities in secondaries.
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