PE use borrowed funds to buy companies, so typically these investments are riskier than the public markets and are mostly illiquid. Private equity cash flows are typically described by the “J-Curve ”, with investments generally being made in years 1-5 (negative returns) and realizations generally occurring in years 4-11 (positive).…
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IPEV Guidelines http://www.privateequityvaluation.com/download/i/mark_dl/u/4012990401/4625734325/151222%20IPEV%20Valuation%20Guidelines%20December%202015%20Final.pdf
"Fair Value for a Fund interest is, at its most basic level, equivalent to the summation of the
estimated value of underlying Investments as if realised on the Measurement Date. The
proceeds from such hypothetical Realisations would flow through to the investor in an
amount equal to NAV. "