EDHEC: How accurate are private asset valuations?
By Evan Clark, Senior Private Market Analyst, EDHEC Infrastructure & Private Assets Research Institute
In a recent EDHEC Infra & Private Assets (EIPA) publication, ‘The Exit Test: What a Decade of Realisations Reveals About Valuation Accuracy,’ we explore the accuracy of private asset valuations by examining realised private equity and infrastructure equity exits across UK listed investment trusts.
We developed a dataset of 333 individual exit transactions across 29 investment trusts spanning 2015 to 2026, relying on financial reporting and regulatory filings of the investment trusts. By comparing each exit price against the last published (and unaffected) carrying value before an announced deal exit, we obtain a measure of valuation accuracy, the uplift or discount at which private assets are ultimately realised relative to their most recently reported carrying value.
Key observations
- Valuations systematically understate exit prices across both PE and infrastructure. Across 333 exits, the mean and median exit price exceeded the prior carrying value by 31% and 19%, respectively. For private equity, the median uplift was 20% across 282 transactions. For private infrastructure, we find a comparable median uplift of approximately 23%. Almost 80% of all exits were completed above the last reported carrying value, and the finding is consistent across investment trusts, time, and buyer types (financial, strategic).
- Fair Value Standard. Under IFRS 13 and FRS 102, valuations of private assets should reflect an exit price as of the measurement date, not a conservative estimate. Persistent uplifts of 20%+ over time and manager are not consistent with fair value principles. Notably, exits to financial buyers achieve similar exit uplifts as exits to strategic acquirers, undermining an industry explanation that uplifts arise from identifying the right buyer.
- Market Valuations and Post 2022 Results. Exit uplifts have fallen since 2022 relative to the 2015-2021 period. Median private equity exit uplifts fell from 23% to ~17.5%. Moreover, exit proceeds relative to starting NAVs are much lower (10-15%) than in the prior period (25-50%). The inflation and interest rate shock of 2022 led to material widening of discounts to NAV. Infrastructure investment trusts had traded at a premium through 2021 and now trade at meaningful discounts (10-20%). For private equity, the discounts widened to 25-40% and have remained wide through Q1 2026.
- Investment Hold period and Exit Uplifts. Exit uplifts decline as hold period increases, from a median of 47% for assets held under three years to near zero for assets held over for 7+ years. The current environment is more impacted by longer hold periods, which partly explains the compression in recent uplifts. The assets acquired in 2020-2022 now face a lower-multiple exit market, potentially offering the risk of discounts at exit.
- Implications beyond listed trusts. The valuation practices documented here reflect those of a large number of underlying private equity and infrastructure managers globally. For defined contribution pension schemes and evergreen funds that must strike frequent NAVs, systematic mispricing transfers value between participants who transact and those who do not. This is a fiduciary concern and an increasingly pressing regulatory issue as private market access is extended to DC Plans.
Conclusion
Across 333 exits and 29 listed vehicles spanning a decade, private asset carrying values have systematically understated realised exit prices by a median of 20% for private equity and approximately 23% for infrastructure. It is directionally consistent across market conditions, exit routes, and the full span of years covered by the dataset.
The hold period analysis reveals an additional dimension. Uplifts are largest for assets with shorter hold periods and converge toward zero for assets held beyond a typical investment horizon (5 to 6 years), which introduces greater risk of exit discounts in the current environment due to the extended hold periods. More significantly, the 2020-2022 vintage, acquired at peak multiples and now facing a structurally lower exit market, represents the first cohort where the historical bias toward understatement may reverse. For those assets, the risk may be overstatement.
The sell-off in listed markets during the COVID-19 crash (March 2020) and the inflation shock (H1 2022) illustrate a consistent pattern in how market conditions transmit to listed investment trust prices versus reported NAVs. In both episodes, share prices fell sharply while NAVs were largely unchanged, reflecting the reporting cadence and the inherent lag in private asset valuation. The same dynamic is observable more recently in the decline of listed software equities: technology-focused investment trusts have seen material share price weakness while their NAVs have adjusted only marginally, if at all.
The listed investment trust universe examined here is a small but transparent window into the private asset industry. The valuation marks reported by these vehicles originate with the same underlying managers whose marks feed into pension funds, insurance companies, sovereign wealth funds, and the rapidly growing universe of evergreen and retail private asset vehicles. A valuation problem that is visible here is, by extension, a valuation problem across the industry.
The stakes are highest where NAVs are used to facilitate frequent member transactions. In defined contribution pension schemes and open-ended private asset funds, participants who enter or exit at a NAV that does not reflect true asset value transfer wealth to or from those who remain. As regulators extend private market access to retail and DC investors, the demand for valuation standards that genuinely reflect exit prices at the measurement date will only grow. At a minimum, back-testing of carrying values against realised exits should become a standard component of valuation governance for any private asset vehicle offering frequent liquidity.
