Realized vs Unrealized Returns
Realized returns come from actual exits and distributions; unrealized returns are paper gains reflected in valuations/NAV.
Definition
Definition Realized returns are the cash outcomes from selling assets or receiving repayments, reflected in distributions. Unrealized returns are valuation-based gains or losses that have not yet been converted into cash. In private markets, unrealized marks can change due to valuation policy, comparable multiples, or updated financial performance. Allocator Context Allocators separate realized from unrealized because realized validates the repeatability of underwriting and value creation. High unrealized gains can be legitimate, but institutions want to understand valuation methodology, exit feasibility, and whether unrealized returns are concentrated in a small number of positions. Decision Authority Committees often place higher weight on realized outcomes when approving re-ups or scaling commitments. When a strategy is heavily unrealized, allocators may size conservatively until realizations confirm the model. Why It Matters for Fundraising Managers should communicate clearly what is realized, what is unrealized, and why. Overreliance on unrealized performance without valuation governance detail increases diligence friction. Key Takeaways Realized returns are cash outcomes; unrealized are marks Unrealized must be backed by credible valuation policy and exit pathways Realizations drive allocator confidence and re-up behavior Concentration of unrealized gains increases perceived risk