Jul 31, 2026
The Capital Account
What the fund reports, and what you actually hold
Omar Hussain
A fund reports one NAV. Each investor owns a different number. Every quarter a VC or PE fund sends its LPs a report containing an income statement, a balance sheet and a cash flow statement. A fourth section is attached to it: the capital account, which restates that NAV at investor level.
Why it matters: the fund's NAV is an aggregate, and nobody transacts on an aggregate. Your capital account is your specific claim on it, and it is the number you actually use, in three places.
A secondary sale. If you exit before the fund winds down, the capital account balance is what you are selling, priced at a discount or a premium to it. In a closed-end fund on a 10+1+1 structure, an investor selling before the end generally sells at a discount.
Your own reporting. An LP is often itself a fund. It tracks the invested fund line by line in order to report up to its own investors.
Your tax position. The capital account is where you look into.
The capital account, in one line
Every capital account runs the same equation.
Four investors, one NAV
A $100,000,000 fund at the end of a quarter. Three LPs, and a GP committing 1% alongside them. $10,000,000 called, $9,000,000 of net income, $5,000,000 distributed.
| Investor | Commitment | Own % | Beginning NAV | + Contributions | + Net income | ± Carry | − Distributions | = Ending NAV |
|---|---|---|---|---|---|---|---|---|
| LP A | 50,000,000 | 50.0% | 24,000,000 | 5,000,000 | 4,500,000 | (404,000) | (2,500,000) | 30,596,000 |
| LP B | 30,000,000 | 30.0% | 14,400,000 | 3,000,000 | 2,700,000 | (242,000) | (1,500,000) | 18,358,000 |
| LP C | 19,000,000 | 19.0% | 9,120,000 | 1,900,000 | 1,710,000 | (154,000) | (950,000) | 11,626,000 |
| GP | 1,000,000 | 1.0% | 480,000 | 100,000 | 90,000 | 800,000 | (50,000) | 1,420,000 |
| Fund | 100,000,000 | 100% | 48,000,000 | 10,000,000 | 9,000,000 | 0 | (5,000,000) | 62,000,000 |
The statement ties in two directions. Every row runs the equation from left to right. Every column sums to the fund line.
Net income comes off the income statement, which is reported alongside and already carries the detail behind it.
Between the lines
Carry is the only column that sums to zero. It moves $800,000 out of the LPs and into the GP, reallocating value between the partners rather than out of the fund. The fund still ends the quarter at $62,000,000.
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