20 May 2020

Alternative Credit - Valuation

Fair value processes for direct loans and a robust credit valuation framework

Alternative Credit managers frequently trade assets that require a degree of subjective judgement in the valuation process. Where liquidity or transparency is not readily available, for example in private credit, assets will often require manager marks typically with validation provided by an independent valuation agent. These manager marks can be determined through a range of different techniques.

This memo covers:

  • 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