20 May 2020

Alternative Credit - Valuation

Alternative Credit managers frequently trade assets that require a degree of subjective judgement in the valuation process. Fair value processes for direct loans and robust credit valuation frameworks are therefore essential and this memo discusses these themes.

Where liquidity or transparency is not readily available, for example in private credit, assets will often require manager marks which can be determined via a range of different techniques. These marks will typically have validation from an independent valuation agent. 

In this memo we discuss:

  • What the Alternative Investment Standards say about Valuation
  • What Accounting Standards such as International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP) say about Valuation
  • Fair value process for Direct Loans including Enterprise Value Estimation and Financial Instrument Specific Valuation Approaches, and
  • Key questions for investors to ask during due diligence processes