NAV Break
A discrepancy between what a fund's books expect an asset or NAV figure to be and what an independent source confirms it actually is.
Definition
A NAV break (or reconciliation break) is a discrepancy between what a fund's ledger expects a position or NAV figure to be and what an independent source — a live exchange balance, a wallet, a custodian statement, or a fund administrator's figure — actually confirms. It's a flagged mismatch for investigation, not automatically an error in either direction; the point of surfacing it is to figure out which side is wrong, or whether both are technically correct but measuring something slightly different, such as a timing difference.
Breaks are typically graded by severity against a defined materiality threshold, so that genuinely immaterial rounding or timing differences don't drown out the handful that represent a real data error worth correcting before NAV is treated as final.
Why it matters
A NAV break caught before publication is a minor operational task; the same break discovered after NAV has already been used to strike a subscription, a redemption, or a fee is far more disruptive to unwind, potentially requiring a correcting entry against an already-settled transaction. Catching breaks early is one of the main reasons funds run shadow accounting or a defined reconciliation process at all.
For LPs, a fund's break-resolution process — how quickly breaks are identified, how they're graded, and how they're documented — is a meaningful proxy for overall operational discipline, even though the breaks themselves are a completely normal part of running any accounting process against live external data.
Common causes and resolution lifecycle
Common causes include an unsettled trade that hasn't yet posted, a duplicated or missed deposit or withdrawal record, a stale or simply wrong price feed, a lag between when an exchange or wallet balance updates and when the ledger reflects it, or a fee or subscription posted to the wrong accounting date.
A typical lifecycle runs: identified (the discrepancy is flagged, usually automatically) → investigated (someone determines the actual cause) → resolved, either with a documented correcting entry — since ledgers in this space are typically append-only, so corrections are new reversing entries, not silent edits to an old one — or explicitly logged as immaterial and ignored with a reason. A break that recurs after being marked resolved or immaterial is generally reopened rather than logged as a fresh, unrelated break, since repetition is itself a signal something systemic is wrong.
Grading breaks by cause and typical severity
| Cause | Typical severity |
|---|---|
| Unsettled trade not yet posted | Low — usually resolves automatically once settlement completes |
| Stale or wrong price feed | Material — directly misstates NAV until corrected |
| Duplicated or missed deposit/withdrawal | Material — directly misstates a cash or asset balance |
| Sub-cent rounding or timing lag | Immaterial — typically logged and closed without a correcting entry |
Common mistakes
Setting materiality tolerance too tight, so every sub-cent rounding or timing difference registers as a break and buries the small number of genuinely material ones.
Setting materiality tolerance too loose, letting a real data error slip through as 'immaterial' when it would actually misstate a subscription or redemption price.
Resolving a break by silently adjusting a balance rather than posting a documented correcting or reversing entry, which destroys the audit trail of what actually happened.
Treating every break as an error rather than distinguishing a genuine data mistake from a timing difference that simply hasn't settled yet.
In practice
Crypto reconciliation has failure modes traditional fund accounting rarely sees at the same frequency — a wallet balance that lags an on-chain transaction by a block or two, a price feed that's genuinely correct on one venue but stale relative to where the fund actually executed, or an exchange API that reports a balance net of an in-flight withdrawal differently than the ledger expects. A materiality floor calibrated for these near-constant small timing differences, rather than one borrowed unmodified from traditional finance, keeps the break queue focused on what actually needs attention.
Run your own period-end numbers through the free NAV Validator to see whether the roll-forward, fee math, and optional per-LP figures tie out the way a reconciliation process would check them.
Questions, answered
What is a NAV break?
A NAV break is a discrepancy between what a fund's ledger expects a position or NAV figure to be and what an independent source — an exchange, wallet, custodian, or administrator — actually confirms. It's flagged for investigation rather than assumed to be an error on either side.
What typically causes a NAV break?
Common causes include an unsettled trade, a duplicated or missed deposit or withdrawal record, a stale or wrong price feed, a lag between an external balance updating and the ledger reflecting it, or a fee posted to the wrong date.
How are NAV breaks graded?
Breaks are typically graded by severity against a defined materiality threshold, so immaterial rounding or timing differences are distinguished from genuinely material errors that need a correcting entry before NAV is treated as final.
How is a NAV break actually fixed?
Through a documented correcting or reversing entry, not a silent balance adjustment — since fund ledgers are typically append-only, a correction is a new entry that offsets the error, preserving a full audit trail of what happened.
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