The short answer

Private investments are valued at fair value — an estimate of what each company would sell for — following the IPEV Valuation Guidelines, updated in 2025, and checked by independent auditors. You'll see your investment's NAV (net asset value), plus measures such as DPI (cash returned), TVPI (total value) and IRR (annualised return). The secondary market gives a reality check: in 2025, buyout fund stakes sold for an average of 92% of NAV. Because results vary widely between managers, due diligence is essential: look at the manager's track record across several funds, its team and strategy, how it creates value, its fund terms and its operations and reporting. Lawrence helps eligible investors assess managers and funds before they commit.

How private investments are valued

Because private companies don't have a daily share price, managers estimate their fair value — broadly, the price the company would fetch if sold in an orderly transaction on the valuation date. Most of the industry follows the International Private Equity and Venture Capital (IPEV) Valuation Guidelines, which the IPEV Board updated in 2025, so valuations are prepared consistently across managers and countries.

Managers typically use a combination of methods:

• Market multiples — comparing the company with similar listed companies or recent sales, for example on a multiple of earnings.
• Recent transactions — the price of a recent investment round or offer for the company.
• Discounted cash flows — the value today of the cash the company is expected to generate.
• Net assets — for asset-rich businesses, the value of what the company owns.

Valuations are usually prepared quarterly, reviewed by the manager's valuation committee and audited each year by an independent firm. The result is the fund's NAV, which is reported to investors.

A valuation in practice

Here's a simplified example of how a manager might value one company using market multiples.

1. Earnings — the company makes US$10 million a year in operating profit.
2. Multiple — similar listed companies and recent sales are valued at around 12 times profit.
3. Enterprise value — 12 × US$10 million = US$120 million for the whole business.
4. Less debt — the company owes US$40 million, leaving US$80 million for shareholders.
5. The fund's share — the fund owns 60%, so its stake is valued at US$48 million.

The manager would then cross-check this with other methods, such as discounted cash flows or recent offers, and the valuation committee and auditors would review it. Repeat that for every company in the fund, add cash and other assets, deduct liabilities — and you have the fund's NAV.

Simplified illustration.

How valuations change over a fund's life

In a fund's early years, many companies are valued close to what the fund paid for them, and fees are being paid, so the reported value may dip slightly — the familiar "J-curve". As managers improve their companies, valuations rise to reflect growing earnings. In the later years, as companies are sold, valuations are replaced by real cash — and the DPI rises. That's why it's best to judge a fund's valuations alongside how much cash it has actually returned, especially once it's several years old.

The secondary market's reality check

One of the best tests of private equity valuations is what other investors will actually pay. The secondary market — where fund stakes change hands — reached a record US$240 billion in 2025, according to Jefferies. Buyers paid an average of 92% of NAV for buyout fund stakes and 87% across all fund stakes. That buyers were willing to pay close to reported values for buyout portfolios is a strong signal that those valuations are realistic.

Exits provide another check. When companies are sold, the sale price can be compared with the last reported valuation. With buyout-backed exits rising 47% to US$717 billion in 2025, according to Bain, there's a growing stream of real transactions confirming values across the market.

Reading the numbers

NAV — net asset value

The current reported value of your investment, based on the fund's latest valuations.

DPI — distributions to paid-in

Cash you've received back, divided by what you've paid in. A DPI of 0.5 means half your money has come back in cash; 1.0 means all of it; anything above 1.0 is profit in your pocket. DPI is the most concrete measure because it counts only real cash.

TVPI — total value to paid-in

Cash returned plus remaining NAV, divided by what you've paid in. A TVPI of 1.8 means your investment is worth 1.8 times what you put in, counting both cash received and current value.

IRR — internal rate of return

The annualised return, taking into account exactly when money went in and came out. Useful for comparing funds, especially alongside TVPI and DPI.

Quartile ranking

How a fund compares with others that started investing in the same year — its "vintage". A top-quartile fund is in the best 25% of its peers.

Looking at all of these together gives the clearest picture: how much value has been created, how much has been turned into cash, and how the fund compares with its peers.

The key measures at a glance

What each measure tells you.

A general guide to private equity performance measures.

Why manager selection matters so much

In the stock market, many investors simply buy an index fund and get the market's return. Private equity doesn't work like that — there's no index fund of private companies, and results vary widely between managers. Research from Moonfare highlights a stark gap between the best performers and the rest. That's why professional investors spend months on due diligence before committing — and why the effort pays off. The difference between a great manager and an average one can be the difference between a good result and an outstanding one.

Due diligence, step by step

1. Track record — results from several previous funds, measured by DPI, TVPI, IRR and quartile ranking, across different market conditions.
2. Team — who makes the decisions, how long they've worked together, and whether the people who built the track record are still there.
3. Strategy — what the manager invests in, how it finds deals and whether it has a genuine edge in its markets.
4. Value creation — how the manager improves companies: operational expertise, growth plans, acquisitions and management support.
5. Realised results — how much of the track record is real cash from exits rather than valuations.
6. Fund terms — fees, hurdle, waterfall, clawback and how much the manager itself invests in the fund.
7. Operations — independent administrator, auditor and custodian; valuation policy; reporting quality.
8. Alignment — whether the manager's own money and incentives are tied to investors' success.

Our guide to private equity fund structures and fees explains the terms to look for.

Where to start

Help assessing managers and funds — and better rates when you invest or receive distributions.

Reading a track record well

• Look at several funds, not just the latest — consistency across vintages is a strong sign.
• Compare within vintages — a fund's quartile against funds that started the same year.
• Focus on realised results — DPI shows how much value has become cash.
• Check net returns — after fees and carried interest.
• Understand the drivers — a few big winners or broad success across the portfolio?
• Look at different market conditions — how did the manager do through downturns?

Benchmarks help too: Cambridge Associates' US private equity index returned 8.7% in 2025, with growth equity at 11.9% and venture capital at 21.1%. Comparing a fund with benchmarks for its strategy and vintage shows how it has really done.

The signs of a great manager

• Consistent results across several funds and market cycles.
• A strong record of cash returned, not just rising valuations.
• A stable, experienced team that has worked together for years.
• A clear, focused strategy and a genuine edge in its markets.
• Hands-on value creation — improving companies, not just financing them.
• Meaningful personal investment by the team in its own funds.
• Transparent, timely reporting to investors.
• Investor-friendly terms — hurdle, whole-fund waterfall, clawback, fee offsets.

Managers who tick these boxes tend to be in high demand — which is one reason platforms and feeder funds that secure access to them are so valuable to individual investors.

Operational due diligence

Professional investors don't just check investment skill — they check how the business is run. Good managers make this easy:

• Independent fund administrator — keeps the books and calculates NAV.
• Reputable auditor — checks the accounts and valuations every year.
• Custodian or depositary — holds the fund's assets safely.
• Clear valuation policy — following the IPEV guidelines, with a valuation committee.
• Quality reporting — regular, detailed updates on each company and the fund.
• Strong governance — an advisory committee of investors and clear conflict-of-interest rules.

Platforms and established feeder funds often carry out much of this due diligence on behalf of their investors — one of the benefits of investing through them.

Fund terms that show alignment

The best fund terms put investors first. According to Cambridge Associates' analysis of fund terms:

• An 8% preferred return is most common — investors earn it before the manager shares profits.
• Whole-fund waterfalls remain the norm — you get all your money back before carry is paid.
• Clawbacks are near-universal — only 2% of funds reviewed lacked one.
• Transaction fee offsets — 93% of funds pass these back to investors in full.

Add a meaningful investment by the manager's own team in the fund, and you have strong alignment between the people managing your money and your own success.

Due diligence on evergreen funds

Evergreen funds need a few extra checks, because money flows in and out continuously:

• How NAV is calculated and how often — and how new money and redemptions are priced.
• Liquidity management — cash buffers, credit lines and the redemption limits.
• Portfolio mix — direct deals, fund stakes, secondaries and co-investments.
• Total costs — management and incentive fees plus underlying fund costs.
• Track record of the platform and the managers it invests with.

Our guide to private market liquidity and lock-up periods explains how evergreen redemptions work.

Due diligence on a single company

Co-investments — investing directly in one company alongside a fund — call for a closer look at the business itself, as well as the manager. Experienced investors ask:

• What does the company do, and why will it grow?
• What price is being paid, and how does the multiple compare with similar companies?
• How much debt is being used to buy it?
• What is the manager's plan to make it more valuable — and its record with similar plans?
• Who runs the company, and are they invested alongside you?
• How and when might it be sold?

Co-investments often carry lower fees and let investors back their highest-conviction ideas, but because they concentrate money in one company, they're usually best as a smaller part of a private equity allocation.

Letting platforms do the heavy lifting

Full due diligence on a private equity manager can take a professional team weeks or months. For most individual investors, the practical answer is to invest through platforms, feeder funds or evergreen funds whose teams carry out that work on their investors' behalf — reviewing track records, meeting the managers, checking operations and negotiating terms. Your job then becomes choosing the right platform or fund and understanding what you're buying — which is exactly where an experienced adviser helps. Lawrence talks clients through the options and the questions to ask, so they can invest with confidence.

Questions to ask any manager

1. What are your previous funds' DPI, TVPI and IRR after fees, and their quartile rankings?
2. How much of your track record is realised in cash?
3. Who are the key decision-makers, and how long have they worked together?
4. How do you add value to the companies you buy?
5. How do you value the portfolio, and who audits it?
6. How much has the team invested in this fund?
7. What are the fees, hurdle, waterfall and clawback?
8. How and how often will you report to investors?

Building a well-chosen portfolio

Even after careful due diligence, the best approach is to spread your private equity across several managers, strategies and vintages. That way, your results reflect a range of skilled managers rather than depending on one. Many investors combine an evergreen fund as a diversified core with selected closed-ended or secondaries funds — and hold structured notes alongside for defined returns and income, today paying up to 13.56% a year on autocalls and 9.72–9.85% a year on Phoenix notes. Our guide to private equity for eligible international investors explains how to build an allocation over time.

Due diligence for expats in Thailand

As an expat investing from Thailand, you'll usually access private equity through international platforms, feeder funds or advisers. A few extra checks help:

• Eligibility — confirm the platform or fund can accept investors with your nationality and residence.
• Currency — most funds are in US dollars or euros; plan how you'll fund commitments and convert distributions.
• Reporting — make sure you'll receive clear, English-language reports and tax information.
• Where it's held — consider whether to hold it alongside your other international investments. Our guide to offshore investment structures explains the options.

Top tips

• Treat manager selection as the key decision.
• Look at several past funds, not one.
• Focus on DPI as well as TVPI and IRR.
• Check the team behind the track record is still in place.
• Confirm independent administration and audit.
• Look for aligned terms — hurdle, whole-fund waterfall, clawback.
• Spread across managers and vintages.
• Get an experienced second pair of eyes.

Three real-world examples

These are illustrations, not real clients.

Richard, 55 — comparing two funds

Richard was choosing between two buyout funds. One had a higher IRR, but most of its value was unrealised; the other had a DPI above 1.5 across three funds. With Lawrence's help, he chose the second for its record of turning value into cash.

Emma, 48 — an evergreen core

Emma chose an evergreen fund from a platform that carries out detailed due diligence on its managers, then added a secondaries fund a year later, building her allocation across vintages.

Paul and Sue — a balanced approach

Paul and Sue spread their private equity across three managers and two strategies, alongside structured notes for income, reviewing each fund's reports with Lawrence every year.

Your due diligence checklist

1. Review several past funds — DPI, TVPI, IRR and quartile.
2. Check the team and its stability.
3. Understand the strategy and value creation.
4. Read the fund terms — fees, hurdle, waterfall, clawback.
5. Confirm administration, audit and valuation policy.
6. Check reporting and investor communications.
7. Spread your commitments across managers and vintages.
8. Talk to Lawrence before you commit.

Investing safely online

Only invest through established platforms, managers and advisers, confirm any bank details directly with the fund before sending money, and use a private, protected connection when you log in to investment platforms on hotel, café or condo Wi-Fi.

How we researched this guide

This guide draws on the IPEV Board's updated 2025 International Private Equity and Venture Capital Valuation Guidelines; Jefferies' 2025 Global Secondary Market Review (February 2026); Bain & Company's Global Private Equity Report 2026; Cambridge Associates' fund terms analysis (August 2024) and 2025 benchmark commentary (July 2026); and Moonfare's research on dispersion in private markets. Checked 14 October 2026. Private equity is a long-term investment, usually available only to eligible investors; valuations are estimates and values can fall as well as rise. This guide is general information, not personal financial advice.