Researcher perspective with Evan Clark, Senior Private Market Analyst at the EDHEC Infrastructure & Private Assets Research Institute

An exit provides an opportunity to compare a private asset’s reported valuation with the price achieved in a sale. When realised prices consistently exceed carrying values, what should investors conclude about the valuations they rely on?

In EIPA’s recent publication, The Exit Test: What a Decade of Realisations Reveals About Valuation Accuracy, Evan Clark examines 333 private equity and infrastructure transactions across 29 UK-listed investment trusts between 2015 and 2026. The findings raise questions about persistent exit uplifts, the implications of conservative valuations and what slower exits may mean for assets still held.

In this researcher perspective, he discusses the findings, their relevance for institutional investors and the limitations of using realised exits to assess valuation accuracy.

Figure 1. Overview of the dataset used in The Exit Test, covering 333 private equity and infrastructure exits across 29 UK-listed investment trusts.

• What was the main research question for the paper?

As part of the valuation research at EIPA, we wanted to compare the exit prices obtained across a large sample of private equity and infrastructure transactions against the most recent valuations. Fair value accounting principles require valuations to reflect an exit price, or what an asset could be sold for on the measurement date.

The study effectively carries out a back test of exits against prior marks. This is challenging because this type of disclosure is typically only available to limited partners. UK-listed investment trusts provided a good alternative, given their filing and disclosure requirements.

We were able to collect data on over 330 deals between 2015 and 2026 across 29 trusts, primarily in private equity but also in infrastructure.

• What were the key findings?

The study showed that approximately 80% of deals were exited at premiums to the latest carrying value, and the median exit uplift approached 20%.

Exit uplifts were larger in the earlier period, from 2015 to 2021, declining after 2022 in the higher interest rate environment. Assets held beyond the normal holding period of five years for private equity tended to show minimal uplifts.

The results were corroborated by the self-reporting of several investment trusts that pursue a fund-of-funds strategy and therefore provide only aggregate fund-level results, rather than asset-by-asset detail.

• When does an exit uplift become a valuation warning sign?

Valuation of private assets is an imperfect exercise, and we should expect deviations from the ultimate exit price realised in a sale. However, a systematic trend of exit uplifts across time and market conditions is inconsistent with fair value accounting principles.

If errors were random, we should observe noise around the exit price, with a similar proportion of positive and negative errors. But this is not the case. More than 80% of exits have transacted above the most immediate undisturbed valuation.

Moreover, many managers explicitly cite a track record of large exit uplifts as evidence of a sound valuation policy.

“Mis-marked assets have a real cost and shift value between buyers, sellers and remaining unit holders.”

— Evan Clark
Senior Private Market Analyst
EDHEC Infrastructure & Private Assets Research Institute

 

Figure 2. Realised exits provide a reference point for assessing private asset valuations. Illustrative photograph.

• Why does it matter if the errors are “conservative”?

Increasingly, private assets are held in vehicles that allow for more frequent dealing. Evergreen or semi-liquid funds are one example. Defined contribution pension plans also accept flows on a periodic basis, with some offering the potential for redemption.

This means that mis-marked assets have a real cost and shift value between buyers, sellers and remaining unit holders. This is likely to bring more regulatory scrutiny, given the different investor types.

Private assets are no longer solely housed in closed-end limited partnerships designed specifically for institutional investors.

• Are today’s net asset values (NAVs) at greater risk of overstatement?

In short, yes. Although exit uplifts have persisted even in the post-2022 period, their magnitude has fallen from over 23% to 17%.

Perhaps more importantly, a much smaller proportion of opening NAV is realised each year, declining from 20–25% before 2022 to closer to 10% annually over the last few years. That may mean that a smaller number of high-performing companies are still able to exit, showing an uplift, while uncertainty or risk remains in the rest of the portfolio.

The higher cost of capital and slower exit activity of the last few years suggest that the risk is to the downside in the current environment. This would be consistent with the view that private asset valuations tend to lag.

During strong markets with good exit conditions, valuations struggle to keep up with market moves, leading to exit uplifts. The opposite is true in markets like today, where there should have been a valuation reset to reflect higher financing costs.

We will continue to watch how exits evolve throughout the remainder of 2026 and into 2027.

Figure 3. Longer holding periods and slower realisations complicate the assessment of private asset valuations. Illustrative photograph.

• How does the holding period affect the results?

For private equity assets held beyond six to seven years, the observed median exit uplift dropped into the low to mid-single digits.

This is important in the current environment because the average holding period has crept up to close to seven years, and we are likely in a sustained era of longer holding periods.

The largest uplifts were observed for short holding periods, suggesting robust exit conditions allowed for opportunistic exits and attractive valuations. An investor today may find the results for longer holding periods more relevant when thinking about valuation risk in their portfolios.

• What are the challenges or limitations in this type of study? Is it representative?

The main challenge, as is always the case with private assets, is data collection. There is no standardised exit reporting across the investment trusts, so identifying transaction details and the most recent undisturbed valuation requires significant time and human effort.

This also requires judgement, given that many details are buried throughout the financial statements and footnotes. As mentioned in the paper, some of the change in value between the most recent valuation and exit reflects market movement. However, observing the results over a ten-year span covers a range of market conditions.

In terms of representativeness, the study covered 29 UK-listed investment trusts. Despite this, the underlying assets, particularly in private equity, show broad representation across the major markets, including the US, UK and Europe.

• What else did you find particularly interesting in the study?

As part of the robustness checks, we explored the pre-exit valuation path. There is a misconception that valuation uplifts mean all of the value was realised through an exit “pop”, and that assets were held closer to cost. The data do not support this.

In fact, the findings were consistent regardless of how much the asset had been written up before exit. We were able to trace the pre-exit path for approximately 90% of the deals. Whether the asset had been written down below 1x or written up to levels between 1x and 5x of cost, exit uplifts persisted.

What realised exits reveal—and what remains uncertain

Clark’s findings raise questions about treating persistent exit uplifts as evidence of sound valuation practice. As private assets feature in vehicles with more frequent dealing, inaccurate marks can shift value between investors entering, leaving and remaining in a fund.

For institutional investors, the slower pace of realisations adds another consideration. Uplifts on the assets that sell may coexist with uncertainty about the assets still held. The smaller uplifts observed after longer holding periods make that distinction particularly relevant when assessing portfolios today.

Realised exits provide evidence against which to assess prior valuations. Interpreting that evidence requires attention to market movements, holding periods and the share of the portfolio that has actually been sold.

📄Read EIPA’s full research.
The Exit Test: What a Decade of Realisations Reveals About Valuation Accuracy.

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