Private Credit Portfolio Company Marks
Can somebody explain the mark to market methodology in private credit?
At my firm marking assets is a bit of a black box that involves internal discussions where senior members of the team arbitrarily assigning numbers they think make sense. What stops a fund from artificially keeping marks high so that BDC NAV and share price doesn't tank?
I’m at a private debt fund (non-BDC though) and it’s a bit of a black box too. We mark our portfolio companies each quarter based on a mix of criteria - public and transaction comps, prevailing market yields for companies with similar profiles as well as the portfolio company’s performance. We invest in LMM PE-backed companies, so there is minimal actual “trading” activity in the market.
It’s all claimed to be an objective process but at the end of the day, it really comes down to how the investment team spins it/cherry picks whatever criteria to frame things a certain way. Our auditors sign off on everything at year-end but it’s not in their best interest to push back too hard and risk us switching providers...
Unde doloribus omnis cupiditate nisi aliquam magni. Cum quos sunt iste recusandae dolorem soluta voluptatem. Nulla iure necessitatibus in harum asperiores et inventore. Libero culpa id sed provident. Ipsam blanditiis eligendi esse dolorem ipsam. Dolor blanditiis consequuntur quis harum est sit praesentium.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...