Valuation Credibility in Private Markets: Why Process Matters More Than Precision

Valuation has always involved judgment. What has changed is the consequence of that judgment, and the expectation that it must be clearly explained.

At Kroll’s 2026 Alternatives and Asset Management Conference in London, a consistent message emerged from investors, regulators and industry leaders: valuation is no longer judged solely by accuracy, but by the strength and transparency of the process behind it.

Regulatory scrutiny is intensifying globally, particularly in semi-liquid and retail-oriented structures. In the UK, the FCA’s 2025 review reinforced expectations around governance, independence and documentation, positioning valuation as a core component of investor protection rather than a technical exercise.

Against a backdrop of slower exits, continued growth in semi-liquid funds, pressure in private credit and ongoing sector repricing, valuation has become a real-time test of credibility.

For managers, the question has shifted: It is no longer “Is the valuation right?” but “Can we clearly demonstrate how it was reached and defend that process under scrutiny?”

Semi-Liquid Structures Are Changing the Standard

Semi-liquid strategies are accelerating this shift. With subscriptions and redemptions taking place against NAV, valuation is no longer theoretical, it directly determines investor outcomes. This places it at the center of perceived fairness between different investor cohorts.

Regulators are increasingly focused on whether valuation processes in these structures adequately protect investors as capital moves more frequently. Expectations around consistency, responsiveness and governance are rising accordingly. When capital is moving, perceived fairness is as important as technical accuracy.

This creates new pressure points for managers:

• Ensuring judgment is applied consistently across investors
• Explicitly reflecting liquidity considerations in valuation approaches
• Balancing responsiveness with stability as market conditions evolve
• Demonstrating that governance frameworks can withstand increased scrutiny

While point estimates remain standard, the use of ranges, sensitivities and scenario analysis is quickly becoming unavoidable.

Credit Markets: Timing the Judgment

In private credit, the challenge is more nuanced: distinguishing temporary dislocation from genuine deterioration.

When spreads widen or liquidity weakens, valuation decisions must balance responsiveness with discipline. Moving too quickly or too slowly can both undermine confidence if decisions are not clearly anchored in fundamentals.

Best-in-class approaches triangulate:

• Borrower performance and covenant behavior
• Observable market data
• Evidence from lender actions such as amendments or restructurings

The critical question is not whether to adjust valuations, but when and that decision is inseparable from governance: who challenges, what evidence is required and how differing views are resolved.

Closed-Ended Structures: The Risk of Inertia

Closed-ended funds offer insulation from redemption pressure, but they are not immune to valuation risk. In the absence of transaction-driven triggers, inertia can become a blind spot. Without deliberate challenge, valuations may lag underlying performance.

Leading managers address this by formalizing reassessment triggers, strengthening valuation committee authority and incorporating independent input. Stability has value but only when it reflects reality rather than delay.

Governance Is the Differentiator

Across all strategies, one conclusion stands out: Valuation credibility is ultimately a governance issue not a modelling issue.

While methodology matters, governance determines whether it is applied consistently, challenged appropriately and documented to withstand scrutiny.

In practice, the strongest frameworks include:

• Clear ownership and escalation pathways
• Independent challenge, without losing investment context
• Robust documentation and audit trails
• A culture that treats valuation as a continuous process

Valuation committees, in this context, are not compliance functions they are critical risk management bodies with direct implications for investor confidence.

Increasingly, firms are combining internal expertise with independent external review to embed structured challenge, benchmark assumptions and scale processes in line with regulatory expectations.

What Leading Managers Are Doing Differently

• Embedding real-time data flows between investment, portfolio and valuation teams
• Defining explicit valuation triggers tied to performance and market events
• Incorporating scenario analysis and ranges alongside point estimates
• Increasing the frequency and scope of independent reviews
• Digitizing audit trails to support investor and regulatory scrutiny

Final Thoughts

Valuation is a claim about value. Today, that claim must be supported not only by data and judgment, but by a process that stakeholders can understand, test and trust.

Firms that invest in governance, transparency and independent challenge will be better positioned to maintain credibility with investors, auditors and regulators alike.

In the next phase of private markets, valuation will not be judged by how smooth it appears, but by how well it stands up to scrutiny.