A discount to NAV occurs when a fund or private company’s shares trade or transact below its calculated net asset value. The opposite — trading above NAV — is called a premium to NAV. Both are common in closed-end funds and private secondary markets, where a share’s price is set by supply and demand rather than by continuous creation and redemption.
Discounts and premiums are a signal worth paying attention to, since they reveal something about how the market feels about a fund’s holdings, manager, or liquidity that the NAV number alone doesn’t capture.
If a fund’s NAV per share is $10 but shares are trading, or being offered on a secondary market, at $9, that’s a 10% discount to NAV. Discounts often reflect illiquidity, uncertainty about the accuracy of the underlying valuation, or reduced investor demand relative to the fund’s stated asset value.
Example: A private fund holding shares in several late-stage startups reports a NAV of $12 per unit. On a secondary marketplace, buyers are only willing to pay $10.20 per unit, a roughly 15% discount, reflecting both illiquidity and skepticism about whether the fund’s private holdings are marked accurately.
Discount to NAV (%) = (NAV per share − Trading Price) ÷ NAV per share
A positive result is a discount; a negative result means the shares are trading at a premium to NAV. Using the example above: ($12 − $10.20) ÷ $12 = 15% discount.
A discount or premium to NAV is ultimately a market opinion layered on top of an accounting figure. Neither the NAV nor the trading price is automatically “correct” — together, they tell you both what a fund says it’s worth and what buyers are actually willing to pay for it right now.
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Disclaimer
This content is for informational and educational purposes only. It does not constitute investment advice, legal advice, or a recommendation to buy or sell any security or to pursue any specific investment strategy.
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Paul leads editorial at Augment, building Pulse into the private markets' go-to intelligence source. He also develops editorial content strategies for startups and venture capital firms. Previously, he spent 15 years as a business and opinion journalist at The New York Times, Fortune, Fast Company, Reuters, and more. He believes transparency creates liquidity—and that someone should actually publish what private shares are trading for. He lives in Marin with his wife and two rescue dogs, and wishes he had more time to surf.
Learn moreWhat does “trading at a discount” mean?
Not necessarily. It can reflect genuine illiquidity risk, but it can also represent an opportunity if the underlying assets are fairly valued and the discount is driven mainly by short-term demand rather than fundamentals.
Because their share count is fixed and shares trade on an exchange like a stock, prices are set by buyers and sellers rather than by daily creation and redemption at NAV, which allows discounts (or premiums) to persist for extended periods.
Yes, particularly for high-demand, late-stage companies ahead of an anticipated exit, where buyer demand for scarce shares can push secondary prices above the company’s last primary valuation.
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