Fair Value Measurement and Disclosure Considerations for Private Assets
SEC Releases
Introduction
On September 28, 2026, Chief Accountant, Kurt Hohl, and Director – Division of Investment Management, Brian Daly, issued a statement highlighting valuation and disclosure considerations for Private Assets, particularly Private Credit.
The statement emphasizes the importance of using appropriate valuation methods, considering current market conditions, and providing investors with clear information about asset valuations, portfolio risks, and related uncertainties.
Key Takeaways
- Accurate Fair Value Measurements
- Private Credit investments often lack readily available market prices, requiring significant judgment to determine fair value. The SEC staff emphasized the importance of robust valuation policies and procedures.
- Consider Current Market Conditions
- Valuations should reflect assumptions that market participants would use, including relevant credit spreads, liquidity conditions, and other reasonably available market information.
- Maintain Timely and Reliable Information
- A lack of timely borrower information does not eliminate management’s responsibility to estimate fair value. Firms should consider whether borrower reporting requirements support ongoing monitoring and financial reporting.
- Provide Clear Valuation Disclosures
- For recurring Level 3 fair value measurements, disclosures should explain the valuation methods used, significant inputs, and how changes in those inputs could materially affect reported values. Generic or overly aggregated disclosures may not provide sufficient information to investors.
- Disclose Material Portfolio Risks
- Firms should consider providing clear information about loan modifications, restructurings, extensions, non-accrual investments, and payment-in-kind (PIK) interest when material. These factors may affect reported income, asset quality, and portfolio risk.
- Review the Use of Investee NAV
- When using another investment fund’s net asset value (NAV) as a practical expedient to estimate fair value, management remains responsible for determining whether the applicable criteria are met. The assessment should consider reasonably available information, including changes in market conditions and secondary-market data.
Vigilant’s Conclusion
This SEC staff statement highlights the importance of maintaining well-designed valuation policies and procedures and providing transparent disclosures for Private Assets, particularly Private Credit investments that require significant judgment to value.
Investment Advisers and Fund Managers should review their valuation processes to ensure that fair value estimates reflect reasonably available information and relevant market conditions. Firms should also assess whether their borrower reporting arrangements provide sufficient information to support ongoing valuation and financial reporting, and whether valuation methods are periodically reassessed as market conditions change.
In addition, Firms should evaluate whether their financial statement disclosures clearly explain significant valuation methods and assumptions, potential valuation uncertainty, and material changes in portfolio risk characteristics. When relying on investee-reported NAV, management should document its assessment of the applicable criteria and consider relevant supporting information.
Overall, effective valuation governance, appropriate oversight, reliable information, and clear disclosures help investors better understand the basis for reported fair values and the risks associated with private assets.