When you invest in an Alternative Investment Fund (AIF), the reported value of your investment is an important indicator of portfolio performance. However, understanding AIF NAV requires more than checking whether the latest number has increased or decreased.
Unlike investments priced continuously on a stock exchange, many AIFs hold unlisted companies, private credit instruments, venture capital investments, or securities that do not trade frequently. Their valuations may therefore depend on financial information, comparable transactions, valuation models, and professional judgement.
Understanding AIF NAV helps investors interpret these valuations, identify potential reporting delays, and distinguish reported gains from realised returns.
SEBI's Alternative Investment Fund Regulations, 2012, particularly Regulation 23, establish valuation requirements for AIFs. SEBI's June 2026 Master Circular consolidates relevant regulatory directions and provides an important reference for current compliance.
This guide explains how valuation works, who performs it, how often investors receive updates, and what the reported figures can—and cannot—tell you.
What Is NAV in an Alternative Investment Fund?
Net asset value, or NAV, represents the value of a fund's assets after deducting its liabilities. At the unit level, NAV generally reflects the net assets attributable to a particular class of units divided by the outstanding units in that class, subject to the fund's accounting and allocation policies.
In simple terms:
NAV = Total assets − Total liabilities
For example, suppose an AIF has investments and cash worth ₹120 crore, liabilities of ₹10 crore, and 11 lakh equivalent units outstanding. Its net assets are ₹110 crore, producing an illustrative AIF NAV per unit of ₹1,000.
The calculation is straightforward; establishing the fair value of the underlying assets can be much more complex.
A reliable AIF NAV calculation depends on how investments are valued, expenses and liabilities are recognised, and income is allocated among investors.
Investors should also distinguish the fund's total net assets from their individual capital account statement. The latter may reflect contributions, distributions, fees, unit holdings, and other investor-specific details.
For a quick explanation of NAV and related AIF terminology, see the AIF and PMS glossary.
Why Does AIF NAV Not Move Like Mutual Fund NAV?
The key difference is often the nature of the underlying portfolio.
Mutual funds holding actively traded listed securities can generally use observable market prices to calculate their NAV frequently. AIFs, particularly Category I and Category II funds investing in private markets, may hold assets without daily market quotations.
Consequently, AIF NAV may change less frequently, even when the economic value of an underlying business is changing.
Consider an unlisted company that reports improving revenue and profitability. Its valuation may increase when new financial statements or a funding transaction become available. That increase may appear in the fund's next valuation report rather than immediately.
The reverse is also possible. Deteriorating business performance, higher borrowing costs, or a weaker comparable-company valuation may reduce fair value.
A stable AIF NAV therefore does not necessarily mean that portfolio risk is unchanged or that the underlying businesses have experienced no developments.
For investors, the relevant questions are whether valuations use current information, whether the methodology is consistently applied, and whether material events are appropriately reflected.
Who Values an AIF Portfolio and How Often?
The answer depends on the AIF category and the applicable regulatory framework.
Under Regulation 23(2), Category I and Category II AIFs must generally value their investments at least once every six months through an independent valuer appointed by the AIF. The interval may be extended to once a year with approval from at least 75% of investors by value, subject to the regulatory conditions.
Investors can separately review the AIF Category I page and AIF Category II page to understand how these categories differ in their investment orientation.
Category III AIFs follow a different requirement: NAV calculation must be independent of the fund management function. NAV must be disclosed at intervals no longer than a quarter for close-ended funds and no longer than a month for open-ended funds.
These are regulatory requirements, not a guarantee that every investor receives a statement immediately after each valuation.
The applicable valuation frequency and investor reporting schedule should be stated in the fund's Private Placement Memorandum (PPM). Investors should check both the date on which the assets were valued and the date on which the resulting figures were reported.
A fund's AIF NAV can therefore have a different valuation date from the investor's statement date.
Investors evaluating Category III strategies can also review the AIF Category III page.
Who Qualifies as an Independent AIF Valuer?
An independent valuer is expected to provide an objective assessment of portfolio value rather than simply adopt the investment manager's preferred number.
SEBI's valuation framework specifies eligibility criteria for independent valuers. Under the relevant provisions consolidated in the June 2026 Master Circular, qualifying routes include an appropriately registered valuer with the specified professional membership, or an eligible subsidiary or holding company of a SEBI-registered credit rating agency. Additional conditions apply to partnership firms and companies acting as valuers.
The Insolvency and Bankruptcy Board of India (IBBI) registered valuer framework provides information on registered valuation entities and eligibility requirements.
Investors evaluating AIF NAV should check the valuer's identity, qualifications, independence, scope of work, and the valuation policy disclosed in the PPM.
The manager also remains responsible for ensuring that the investment valuation is carried out according to the applicable framework and for the true and fair valuation of the scheme's investments.
How Are Unlisted and Illiquid AIF Holdings Valued?
When securities do not trade regularly, valuation requires a structured estimate of fair value. SEBI's framework and, where adopted, the International Private Equity and Venture Capital Valuation (IPEV) Guidelines provide useful reference points for private-market valuation.
Common approaches include:
- Market approach: Uses comparable companies, transactions, or market multiples, adjusted for relevant differences.
- Income approach: Estimates future cash flows and discounts them to present value using an appropriate rate.
- Cost approach: Considers the cost of replacing an asset or recreating its economic utility, where suitable.
For an unlisted company, a valuer might examine revenue growth, profitability, debt, funding rounds, comparable businesses, and market conditions. The chosen technique must fit the asset and the available evidence.
An illiquidity discount may be relevant when an investment cannot be sold readily, but it should not be applied mechanically. Its appropriateness and size depend on the facts and the valuation methodology.
The 2025 IPEV Guidelines emphasise fair value as a basis for reporting private-capital investments and distinguish the valuation basis from the techniques and inputs used to calculate it. The 2025 edition was published in December 2025 and continues to emphasise fair-value measurement at each measurement date.
The implication for AIF NAV is important: an estimate is not necessarily inaccurate simply because no live market price exists. However, the estimate should be supported by defensible assumptions, current information, and a documented methodology.
What Happens When an AIF Valuation Method Changes?
Valuation methods may need to change when a company matures, new market evidence becomes available, an investment's structure changes, or the existing approach is no longer appropriate.
A methodology change is not automatically a warning sign. The important questions are why it occurred, whether it was properly approved and documented, and how it affected reported values.
SEBI's framework addresses valuation policies, disclosure, and changes in valuation methodology. Investors should review the PPM and relevant communications for the stated procedure and the impact of material changes.
When AIF NAV changes significantly after a methodology revision, request a clear explanation of whether the movement reflects underlying business performance, new market evidence, a change in assumptions, or the revised valuation technique.
A transparent fund should be able to explain the change without relying solely on the headline NAV.
AIF Valuation Deviation Triggers: 20% and 33%
A key point added under the current SEBI valuation framework is how significant valuation movements are communicated to investors.
At the individual asset level, where there is a deviation of more than 20% between two consecutive valuations or more than 33% in a financial year, the manager is required to inform investors about the reasons and relevant factors behind the change. These may include changes in accounting practices or policies, assumptions or projections, valuation methodology and approach, or other factors affecting the valuation.
This does not mean that a 20% or 33% movement automatically indicates an error or a problem with the fund. Instead, the threshold creates an additional transparency point for investors.
Investors should therefore distinguish between:
- a change caused by actual business or market developments;
- a change caused by revised assumptions or projections;
- a change caused by accounting or valuation inputs; and
- a change resulting from a revised valuation methodology.
Where the valuation methodology or approach changes within the prescribed valuation framework, the applicable disclosures should explain the effect of the old and new methodologies on the reported investment value.
This makes AIF valuation deviation triggers an important part of evaluating changes in reported NAV.
How Often Will You Actually See Your AIF NAV?
The answer depends on the fund category, regulatory requirements, valuation timetable, and reporting arrangements.
In addition to investor statements, SEBI introduced a specific framework for reporting AIF unit values to depositories. Its 6 February 2026 circular required AIFs, through their Registrar and Transfer Agents (RTAs), to upload the latest available NAV corresponding to each ISIN into the depository system within the prescribed timeline. SEBI's February 2026 AIF NAV reporting circular
The current consolidated framework specifies that the latest available NAV corresponding to each ISIN should generally be uploaded within 30 days from the date of valuation of the investment portfolio. The valuation date is the date of the valuation report when an independent valuer performs the valuation, or the date on which the valuation is documented in the fund's internal records when an internal valuer is used.
This makes NAV reporting to depositories an important part of AIF NAV reporting, but it does not mean that every underlying asset is revalued daily.
Investors should distinguish:
- Valuation date: When the portfolio valuation was determined or documented.
- NAV reporting date: When the resulting value was reported.
- Statement date: When the investor received their statement.
- ISIN-level unit value: The value associated with the relevant class of dematerialised units in depository records.
A delayed AIF NAV update may reflect the reporting timetable rather than a lack of portfolio activity. The investor should nevertheless confirm that the latest available value has been reported in accordance with the applicable requirements.
The depository framework also makes clear that the NAV displayed is based on the valuation methodology and accounting practice followed by the relevant AIF and should be read together with the investor's statement and fund documents.
Category III AIF NAV: What Investors Should Understand
Category III AIF NAV follows a different framework from the valuation frequency applicable to Category I and Category II AIFs.
The key requirement is that Category III AIF NAV calculation must be independent of the fund management function. For close-ended Category III funds, NAV is disclosed at intervals no longer than a quarter, while open-ended Category III funds must disclose NAV at intervals no longer than a month.
For investors, this means the NAV calculation process, valuation policy, relevant class or series of units, and reporting frequency should all be reviewed in the applicable fund documents.
The NAV attributable to an investor can also differ from the fund-level economics of another class or series where different fees, expenses, allocation policies or unit terms apply.
Therefore, when reviewing a Category III AIF NAV, investors should not rely only on a headline number. They should check the applicable class, series, valuation date, reporting date and transaction terms.
What Does AIF NAV Not Tell You About Your Investment?
NAV is useful, but it is not a complete measure of investment quality.
A fund may report an increase in AIF NAV without having sold its investments or generated cash for investors. Conversely, a fund may distribute cash, causing its NAV to fall even though the distribution represents a return of value to investors.
Three performance measures help complete the picture:
- DPI (Distributions to Paid-In Capital): Cash and other distributions returned relative to capital actually contributed.
- TVPI (Total Value to Paid-In Capital): The combined value of distributions and remaining investment value relative to paid-in capital.
- RVPI (Residual Value to Paid-In Capital): The remaining unrealised investment value relative to paid-in capital.
For example, a fund with a TVPI of 1.5x has a reported combined value of 1.5 times its paid-in capital. That does not mean investors have received 50% in cash. The remaining value may still depend on future exits.
Investors should also consider the J-curve: private-market funds can experience early negative returns due to fees, expenses, and the time required for investments to mature, followed by potential improvement as portfolio companies grow and exits occur.
An increase in AIF NAV should therefore be assessed alongside realised distributions, remaining unrealised value, fees, and the fund's exit progress.
For a deeper explanation of XIRR, CAGR and TWRR and how different performance measures should be interpreted, see the XIRR vs CAGR vs TWRR guide.
Why Can't You Compare Two AIFs by NAV Alone?
A NAV of ₹150 per unit is not inherently better than a NAV of ₹100 per unit. The difference could reflect the original issue price, unit structure, distributions, fees, or the timing of investments.
Even two funds with similar reported NAV growth may have very different risk profiles, liquidity constraints, and levels of unrealised gains.
To compare AIF NAV meaningfully, examine the following:
| Metric | What it helps you understand |
|---|---|
| NAV trend | How reported unit value has changed |
| DPI | How much capital has been returned |
| TVPI | Total reported value relative to paid-in capital |
| RVPI | How much value remains unrealised |
| IRR or XIRR | Time-adjusted investment performance |
| Valuation frequency | How regularly the portfolio is assessed |
| Portfolio concentration | Exposure to individual investments or sectors |
| Realised vs unrealised value | How much reported value has actually been converted into cash |
Comparisons are most useful when funds have similar strategies, investment periods, fee structures, and reporting conventions. Different classes of units may also have different economics.
Questions to Ask Your Fund Manager About Valuation
Before investing, ask the manager these practical questions:
- Who is the independent valuer, and what qualifications do they hold?
- What valuation methodology is used for listed and unlisted investments?
- How frequently is the portfolio valued, and how frequently is NAV reported?
- How are illiquid holdings and material corporate developments reflected?
- What happens when the valuation methodology changes?
- Where can I access the latest NAV, capital account statement, and audited financial statements?
- What proportion of reported performance comes from realised exits versus unrealised valuations?
- How do DPI, TVPI, and RVPI compare with the fund's investment objectives?
- Has any material valuation deviation occurred between consecutive valuation periods?
- What is the valuation date and what is the NAV reporting date?
- Which valuation guidelines and methodology are used for each asset class?
- Does the PPM explain the valuation policy and reporting frequency?
These questions help investors move beyond headline returns and assess whether the fund's reported value is supported by a credible valuation process.
Investors can also review the AIF Private Placement Memorandum (PPM) guide to understand where valuation methodology, reporting and related disclosures are typically covered.
Conclusion: Evaluate AIFs Beyond the Headline NAV With ALTPORT
Understanding AIF NAV is an essential part of evaluating alternative investments, particularly when portfolios contain unlisted or illiquid securities. The number matters, but so do the assumptions behind it, the independence of the valuation process, the reporting frequency, and the amount of value actually returned to investors.
At ALTPORT, investors can explore alternative investment strategies and review the information needed to make more informed decisions.
- Learn how to assess fund disclosures in our guide to the AIF Private Placement Memorandum (PPM).
- Explore the AIF investment process before committing capital.
- Review ALTPORT's AIF performance reports for additional performance context.
- Explore AIF funds in India to compare available fund strategies and categories.
Before investing, review the fund's offering documents, valuation policy, fee structure, liquidity terms, and risk disclosures. Consider seeking professional advice where needed.
Disclaimer
This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to invest in any AIF. Valuation methodologies and regulatory requirements may change. Investors should consult the latest SEBI regulations, applicable fund documents, and qualified professionals before making investment decisions. Investments in securities and alternative investment funds are subject to market risks, valuation uncertainty, and potential loss of capital.