SEC Calls for Greater Rigor in Valuing Private Credit Assets

The Securities and Exchange Commission (SEC) has issued a directive urging the financial industry to exercise caution when valuing private assets, specifically private credit, as noted in a statement released on Monday, September 28. The directive, authored by SEC Chief Accountant Kurt Hohl and Director of the Division of Investment Management Brian Daly, emphasizes the need for rigorous valuation practices and transparent disclosure of these valuations and associated risks to investors.

The SEC has observed a substantial increase in private credit investments within registered fund portfolios, growing nearly 60% from $170 billion in December 2020 to $270 billion in December 2025. These assets, typically illiquid and customized loans negotiated individually, lack accessible secondary markets and thus present challenges in determining their fair value. Central to this valuation process is the availability of timely information, which the SEC stresses is not a license to avoid fair valuation estimation.

The SEC's statement underscores that robust policies and procedures, complemented by comprehensive disclosure, enable investors to comprehend an entity's fair value determination process, the judgements involved, and the associated risks. As the markets evolve, providing context around valuation bases and inherent uncertainties becomes increasingly important for investors to evaluate private assets measured at fair value.

The growing trend of private credit serving as a primary source of corporate capital is also highlighted, with lenders increasingly seeking detailed operational insights as part of ongoing underwriting relationships.