Financial Planning
Unrealized Gains vs. Cash Returns: Follow a Partial Exit
Follow a partial exit from marked value to realized gain, remaining NAV and fund cash without calling a write-up an LP payout.
What you will learn
- Separate cost, marked value, sale proceeds and LP distributions.
- Reconcile a fictional partial realization to the remaining holding.
- Explain why a write-up is not cash returned.
An unrealized gain is a change in the value assigned to an investment still held. A realization converts some or all of that holding into proceeds. A fund distribution is a further step that pays investors. Keep all three events separate when explaining performance.
Use the valuation date and the transaction date
A valuation is an estimate at a date, not a promise of the next sale price. The 2025 IPEV guidelines provide a current framework for private-capital fair-value measurement. Their purpose is valuation; they do not turn estimated value into proceeds.
A later transaction can also bring fees, different security rights or new information. The simple example below assumes none of those except the explicitly lower sale price.
Mark a fictional holding
Cedar Fund invests $3 million in one holding. At a reporting date, its reviewed carrying value is $5 million. The $2 million difference is unrealized gain in this simplified model. No shares have been sold and no cash has been distributed to LPs.
Before the sale, $M
| Measure | Amount | Status |
|---|---|---|
| Investment cost | $3.0 | Historical invested amount |
| Carrying value | $5.0 | Remaining asset value at the stated date |
| Unrealized gain | $2.0 | Not sale proceeds |
| Cash from realization | $0 | No sale yet |
| LP distribution | $0 | No distribution yet |
Work the partial sale
The fund then sells half the holding for $2.4 million. Assume exactly half the original cost, $1.5 million, belongs to the sold portion. The unsold half remains valued at $2.5 million. There are no costs, taxes, other changes or LP distributions.
After the partial sale, $M
| Component | Calculation | Amount |
|---|---|---|
| Realized gain | $2.4M proceeds − $1.5M sold cost | $0.9M |
| Remaining cost | $3M − $1.5M | $1.5M |
| Remaining unrealized gain | $2.5M value − $1.5M cost | $1.0M |
| Total value held by fund | $2.4M cash + $2.5M investment | $4.9M |
| Total gain relative to original cost | $4.9M − $3M | $1.9M |
Realized plus remaining unrealized gain reconciles: $0.9M + $1M = $1.9M. The total is $0.1M below the previous $5M carrying value because the sold half realized $2.4M rather than its earlier $2.5M mark.
Do not call fund cash an LP distribution
The $2.4 million is now cash at the fund in this example. LPs have still received zero unless a separate distribution occurs. The fund may have obligations or permitted uses that affect any distribution. Use the governing documents and reviewed accounting records, not a sale headline, to establish what is payable.
Invest Europe’s portfolio reporting guidance calls for investment-level changes and valuation information. Preserve the sale, remaining investment and investor distribution records as linked but separate events.
Copy the realization bridge
Partial-exit worksheet
Investment / security / currency: [ ]
Original cost / prior value / valuation date: [ ]
Portion sold / cost allocated under reviewed method: [ ]
Gross proceeds / costs / net proceeds / settlement date: [ ]
Realized gain or loss: [ ]
Remaining cost / remaining value / unrealized gain: [ ]
Cash retained at fund / actual LP distribution, if any: [ ]
Reconciliation to prior value / new information / owner: [ ]Make the next update precise
A clear explanation says what was marked, what was sold, what remains and what investors actually received. Keep that reviewed narrative and the follow-up questions together with Finta’s emerging-manager resources. Do not describe unrealized value as a payout or a partial exit as a complete fund realization.
About this lesson. By Finta Editorial Team. Sources reviewed November 14, 2026. All example amounts, entities and outcomes are fictional teaching inputs, not observed fund performance. General education, not legal, tax, accounting or investment advice. Use qualified advisers and the governing documents for an actual fund.