Valuing Private Markets: Can We Get It Right?
Private markets are expanding. As of 2024, private capital assets under management have surged to over $14 trillion globally, tripling over the past decade. Private credit alone now exceeds $2 trillion globally, according to the International Monetary Fund. But with growth comes scrutiny. Regulators, including the U.S. Securities and Exchange Commission (SEC), the European Central Bank (ECB), and the UK’s Financial Conduct Authority (FCA), are taking a closer look. Their focus? Strengthening governance, enhancing transparency, and ensuring valuations support market integrity and investor protection as private markets expand.
Regulators Are Paying Attention— And So Should Investors
Unlike public markets, where prices adjust continuously through active trading, private asset valuations often depend on complex models, professional judgement and less observable assumptions. All of which increases valuation risk when investors need more transparency.
Recent regulatory reviews, including the FCA’s 2025 private market valuation review and the ECB’s assessment of private credit exposures, emphasise the need for robustvaluation practices to support investor protection and financial stability. Their findings highlight several key areas for improvement for stakeholders in this process, including governance structures, independence, consistency in valuation methodologies, and transparency in reporting. These stakeholders include asset managers, alternative investment fund managers (AIFMs), investment and portfolio managers, and investment advisers —all of whom play a direct role in determining and overseeing valuations. Additionally, investors, valuation service providers, trade bodies, and other regulators contribute to shaping the frameworks and standards that support valuation integrity.
The FCA’s review, covering 36 firms managing £3 trillion of assets, identified examples of weaker governance, concerns about independence and inconsistent documentation. In some cases, firms lacked clear processes for reevaluating assets when market conditions changed. There were also instances where firms did not maintain proper documentation of independent review and challenge processes. As a result, the FCA has called on private asset firms to strengthen their valuation processes and effectively manage potential conflicts of interest.
The SEC and IMF have also raised concerns about private investments that can lack observable markets. Without clear price discovery, this could lead to over reliance on assumptions, underscoring the need for strong governance and effective challenge. The takeaway? As private markets evolve, valuation practices must be more robust and capable of addressing higher degrees of valuation risk. This is especially important when that risk is distributed to a broader group of investors.
Private markets are expanding rapidly —not only in size and complexity but also in accessibility, with new structures allowing a broader range of investors to participate. The FCA has observed a growing trend of retail investors, rather than just traditionally sophisticated investors, venturing into non-public assets such as private equity, venture capital, private debt, and infrastructure. This shift reflects a broader global trend. In the U.S., the Securities and Exchange Commission (SEC) has signalled plans to allow retail investors greater access to private markets, including private equity and hedge funds —an initiative aimed at expanding investment opportunities beyond institutions and high-net-worth individuals.
Unlike traditional private market investments, which typically lock in capital until an exit event, some of these new vehicles allow investors to purchase and redeem their interests throughout the fund’s life, creating more dynamic liquidity considerations. This distribution of valuation risk across a broader investor base necessitates stronger valuation governance and transparency. Without it, uncertainty rises and can increase risk in financial markets. Reliable valuations protect investors, enhance market efficiency, and support the long-term stability of these markets.
International Valuation Standards: A Global Benchmark
For private markets to thrive and contribute positively to financial stability, they require a strong foundation of valuation governance and transparency. This is where the International Valuation Standards (IVS) play a crucial role. As the globally recognised framework developed by the not-for-profit International Valuation Standards Council (IVSC), IVS promotes greater consistency, comparability, and accountability for all asset classes.
IVS isn’t just a set of rules; it’s a framework that supports robust valuation practices. The 2025 update of the IVS Standards, effective January, introduced a number of refinements that address key challenges in private market valuations. It strengthens guidance on valuation inputs (IVS 104 – Data and Inputs), model selection (IVS 105 – Valuation Models), and reporting (IVS 106 – Documentation and Reporting), reinforcing the role of high-quality valuation practices in maintaining trust and credibility.
Collaboration with IOSCO
The IVSC’s commitment to enhancing global valuation practices is reinforced through its formal agreement with the International Organization of Securities Commissions (IOSCO). This collaboration supports the development of internationally consistent valuation standards, strengthening regulatory confidence and in ensuring valuations remain fit for purpose in an evolving financial landscape.
IVS 500: Financial Instruments
For financial instruments —where complexity, volume and frequency of valuations are often defining characteristics— IVS500 establishes a set of valuation principles with these asset classes in mind. It provides guidance on:
- Governance (IVS 180 — Valuation Control Framework)
- Risk assessment (IVS 500.140 — Quality Control Overview)
- Transparency (IVS 10—Documentation)
- Independent oversight (IVS 10 — Data and Inputs Overview)
This isn’t just about meeting regulatory requirements. It’s about ensuring valuations stand up to scrutiny. Can investors and market participants trust the numbers?
Ensuring Independence in Valuation Processes
Regulators aren’t just focused on methodology — they are also working to improve valuation governance, mitigate conflicts of interest and enhance oversight. The FCA’s 2025 report highlighted key risks, including asset values tied to performance fees, limited independence in valuation committees, and insufficient third-party reviews.
IVS provides guidance to strengthen valuation governance in areas including independent oversight, quality control and the use of external valuation reviews. The goal? A valuation process that investors, regulators, and market participants can trust.
The Future of Private Market Valuations
As private markets continue to grow, the need for robust, transparent valuations is more urgent than ever. While many firms are already improving their valuation processes, regulators have signalled that further progress is needed. IVS supports this and provides a framework to consider when trying to meet these expectations.
So, what’s next? Will firms lead the charge in strengthening valuation governance? Or will regulatory and investors’ demands drive change? Ensuring valuations reflect economic reality isn’t just about compliance— it’s about safeguarding the future of private markets.
Register for our free webinar: Exploring Valuation in Private Credit Markets
Thursday 8 May 2025, 14:00 (BST)
