Definition
A Fractional Interest Discount is a reduction applied when valuing less-than-whole ownership interests in assets. This discount reflects that partial interests are less desirable than full ownership due to limited control, potential disagreements among co-owners, and reduced marketability.
Significance in Alternative Asset Valuation
Fractional interests in alternative assets arise in various contexts:
Common scenarios:
- Family collections: Inherited interests shared among siblings
- Investment partnerships: Limited partner interests in art funds
- Charitable giving: Fractional donations to museums
- Entity structures: FLP/LLC interests holding collectibles
Discount considerations:
- Control limitations: Fractional owners cannot unilaterally decide to sell
- Partition rights: Legal complexity of dividing or selling fractional interests
- Marketability constraints: Few buyers seek fractional interests in collectibles
- Co-owner relationships: Potential for disputes affecting value
Discounts for fractional interests in alternative assets can be substantial—often 15-35%—depending on the size of the interest, rights attached, and nature of co-ownership arrangements.
How Impossival Approaches This
We value whole assets and can provide supporting data for fractional interest discount analyses. Our valuations establish the baseline from which appropriate discounts can be applied based on specific ownership circumstances.
Related Concepts
• Minority Interest Discount - Discount for non-controlling stakes • Marketability Discount - Discount for sale restrictions • Blockage Discount - Discount for large concentrated holdings • Fair Market Value - Baseline value before discounts