Key Takeaways
- • EDHEC Infrastructure & Private Assets Research Institute (EIPA) found that almost 80% of 333 realized private equity and infrastructure exits across 29 UK-listed investment trusts (2015-2026) were completed above the last reported carrying value.
- • Mean and median exit uplifts were 32% and 19% across all transactions, with median uplifts of about 20% for private equity (282 transactions) and about 23% for private infrastructure.
- • The research argues persistent uplifts of this magnitude are inconsistent with fair value principles under IFRS 13 and FRS 102, implying systematic undervaluation in reported NAVs.
- • Uplifts have compressed since 2022: median PE exit uplifts fell from 23% to about 17.5%, and exit proceeds relative to starting NAVs dropped to 10-15% from 25-50%.
- • Uplifts decline with hold period, from a median of 47% for assets held under three years to near zero beyond seven years, raising valuation and fiduciary concerns for DC pension schemes and evergreen funds.
Summary
A new paper from the EDHEC Infrastructure & Private Assets Research Institute (EIPA), titled "The Exit Test: What a Decade of Realisations Reveals About Valuation Accuracy," examines whether private asset valuations accurately reflect realized prices. The study compiles 333 private equity and infrastructure equity exits across 29 UK-listed investment trusts between 2015 and 2026, drawing on investment trust financial reporting and regulatory filings. Each exit price was compared with the last published, unaffected carrying value before the announced deal.
The results indicate that reported valuations systematically understate realized prices. Across all transactions, the mean uplift was 32% and the median 19%, and almost 80% of exits closed above the last reported carrying value. Median uplifts were approximately 20% for private equity and 23% for private infrastructure. According to the researchers, the pattern held across time periods, investment trusts and buyer types, and exits to financial buyers achieved similar uplifts to those sold to strategic acquirers, which the paper argues undermines the industry explanation that uplifts reflect finding the right buyer.
The authors state that persistent uplifts of 20% or more over time and across managers are not consistent with fair value principles under IFRS 13 and FRS 102, which require valuations to reflect an exit price as of the measurement date. The paper also reports that uplifts have fallen since 2022. Median private equity exit uplifts declined from 23% in the 2015-2021 period to roughly 17.5%, and exit proceeds relative to starting NAVs fell to 10-15% from 25-50%. The researchers link this to the 2022 inflation and interest rate shock, which widened discounts to NAV: infrastructure trusts moved from a premium through 2021 to discounts of 10-20%, and private equity trusts saw discounts of 25-40% that remained wide through Q1 2026.
Hold period is another factor. Median uplifts fall from 47% for assets held under three years to near zero for assets held seven years or more. The paper suggests the current environment, with assets acquired in 2020-2022 facing a lower-multiple exit market, partly explains recent compression and carries the risk of exit discounts.
Beyond listed trusts, the authors argue the valuation practices documented reflect those of many underlying PE and infrastructure managers globally. For defined contribution pension schemes and evergreen funds that must strike frequent NAVs, they warn that systematic mispricing transfers value between investors who transact and those who do not. The paper characterizes this as a fiduciary concern and an increasingly pressing regulatory issue as private market access expands to DC plans.
The results indicate that reported valuations systematically understate realized prices. Across all transactions, the mean uplift was 32% and the median 19%, and almost 80% of exits closed above the last reported carrying value. Median uplifts were approximately 20% for private equity and 23% for private infrastructure. According to the researchers, the pattern held across time periods, investment trusts and buyer types, and exits to financial buyers achieved similar uplifts to those sold to strategic acquirers, which the paper argues undermines the industry explanation that uplifts reflect finding the right buyer.
The authors state that persistent uplifts of 20% or more over time and across managers are not consistent with fair value principles under IFRS 13 and FRS 102, which require valuations to reflect an exit price as of the measurement date. The paper also reports that uplifts have fallen since 2022. Median private equity exit uplifts declined from 23% in the 2015-2021 period to roughly 17.5%, and exit proceeds relative to starting NAVs fell to 10-15% from 25-50%. The researchers link this to the 2022 inflation and interest rate shock, which widened discounts to NAV: infrastructure trusts moved from a premium through 2021 to discounts of 10-20%, and private equity trusts saw discounts of 25-40% that remained wide through Q1 2026.
Hold period is another factor. Median uplifts fall from 47% for assets held under three years to near zero for assets held seven years or more. The paper suggests the current environment, with assets acquired in 2020-2022 facing a lower-multiple exit market, partly explains recent compression and carries the risk of exit discounts.
Beyond listed trusts, the authors argue the valuation practices documented reflect those of many underlying PE and infrastructure managers globally. For defined contribution pension schemes and evergreen funds that must strike frequent NAVs, they warn that systematic mispricing transfers value between investors who transact and those who do not. The paper characterizes this as a fiduciary concern and an increasingly pressing regulatory issue as private market access expands to DC plans.
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