How should I present realized versus unrealized investments?

The eight states a position can be in

Most records use two labels for what is actually eight situations, and the compression is where paper gains start reading as outcomes.

• Realized. Cash or marketable securities actually returned. This is the only category that is not an estimate.
• Partially realized. Some proceeds returned, a stake retained. Both halves need showing, since a partial sale at a good price says something different from a full exit.
• Unrealized, with a subsequent priced round. A transaction price can be a useful valuation input, but assess the timing, security terms and any changes since that transaction. A financing price is not a realized outcome.
• Unrealized, marked at cost. Often the honest answer for a recent investment, and one that reads as discipline rather than as weakness.
• Unrealized, marked at a manager's estimate. Legitimate and the most scrutinised, because the manager is valuing their own work. Say the basis.
• Unrealized, marked from a convertible instrument. Notes and safes carry conversion terms that make a headline valuation misleading without them.
• Written down. An impairment you have taken, which is evidence of a functioning valuation process rather than an admission.
• Written off. Value taken to zero under the stated methodology. Include these positions when they belong in the sample; their absence alone does not prove a record is incomplete.

Valuation dates and basis, which is where records lose credibility

Every unrealized number is an opinion as of a date. Two disciplines carry most of the weight.

State the as-of date on every mark, and use the same date across the whole record. A table blending marks from three different quarters is not internally comparable, and an allocator who spots it will ask what else is inconsistent.

State the basis per position rather than once at the bottom. The international private equity and venture capital valuation guidelines, published by the IPEV Board and endorsed by numerous national associations, are the reference most auditors and administrators work from for fair value in private capital, and naming the basis you used is more credible than asserting a number. Where a valuation is your own estimate rather than a third-party price, say so in the same row rather than in a footnote.

A pre-fund record may not have been audited. State what verification exists and provide the underlying evidence you are permitted to share. The angel, scout, operator and SPV guide explains how to describe those different records.

The risk of presenting paper gains as success

This is the single most damaging pattern in a first-time manager's track record, and it is usually accidental.

Recent financing rounds can support unrealized valuations, but the value may change before exit. Explain the relevant terms, date and valuation process rather than treating the latest round as a realized result.

Make distributions, remaining value and their respective bases easy to distinguish. Explain the uncertainties affecting unrealized value without presenting an exit scenario as a promised outcome.

The disclosure checklist, public and private

Two versions of the same discipline, because a public document and a data room carry different amounts of detail and the same obligation to be accurate.

• Public materials: the split between realized and unrealized, the as-of date, the sample size, whether figures are gross or net, and a statement that unrealized values are estimates that may not be achieved. No position-level valuations without consent, and nothing confidential to a company.
• Public materials: where any performance appears at all, the methodology in one sentence and the fact that past performance does not indicate future results, in the form counsel approves rather than a phrase copied from another fund.
• Data room: the position-level table with entry date, cost, current value, basis, valuation date, and status for every investment, including the ones written off.
• Data room: the valuation policy itself, naming who values, on what basis, how often, and who reviews it.
• Data room: any third-party valuation, audit, or administrator confirmation that exists, since an independent party's involvement is worth more than any wording you choose.
• Both: the same definitions of realized and unrealized, stated once and used everywhere, per ILPA's requirement that a fund be consistent and disclose its methodology.

What the marketing rules require when both appear

For advisers subject to United States marketing rules, gross performance may not be presented without net shown with at least equal prominence, in a format designed to facilitate comparison, calculated over the same period.

ILPA’s guidance discusses presenting gross metrics for realized and unrealized portfolio portions alongside total-portfolio net performance. Applicable SEC staff guidance has conditions; it is not a blanket exemption for every selected extract. Confirm the current gross/net presentation with counsel. Distinguish calculations with and without subscription-facility impact where required by the reporting framework.

Those are United States requirements. Other jurisdictions regulate performance communications on their own terms, and the presentation should be reviewed by counsel wherever it will be sent.

What limited partners are testing

Mostly whether the manager values their own work conservatively when nobody is checking.

• Is the realized column populated at all, and if not, does the manager say so plainly?
• Are marks dated, and are all the dates the same?
• Is the basis stated per position, and how many positions rest on the manager's own estimate?
• Are write-downs and write-offs present, or does the record contain only positions that went up?
• Would the administrator, auditor, or valuation provider recognise these numbers?

What a clean presentation does not prove

Separating realized and unrealized results makes the record easier to interpret. It does not validate the underlying calculations or make unrealized value more likely to be realized.

This page states no view on what proportion of a portfolio should be realized at any point, and publishes no valuation benchmark, because both depend on vintage, stage, and strategy and neither was verified.

This page is educational and general. It is not legal, tax, accounting, valuation, or investment advice. Valuation policy and performance presentation should be reviewed by an auditor, an administrator, a valuation professional, or counsel before materials are used.