Considerations for Daily Valuations

Under U.S. GAAP (ASC 820) and IFRS 13, fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Daily valuations apply this same framework at each measurement date, incorporating relevant market developments and investment-specific information. Importantly, a daily valuation process does not necessarily result in daily changes to an asset’s fair value.

Periods of heightened market volatility have further reinforced the importance of timely valuations. The software sector sell-off in the first half of 2026, driven in part by concerns over AI-related disruption, heightened scrutiny of potentially stale valuations and outdated NAVs. Rapid shifts in market sentiment illustrated how valuations established only weeks earlier could become less representative of current market conditions. During such periods, daily valuations can help ensure NAVs reflect available market information, reducing potential pricing disparities between subscribing, redeeming and existing investors. Effective daily valuation processes require ongoing assessment of market developments and asset-specific information for their potential implications for fair value, even when reported valuations remain unchanged.

Regulatory scrutiny is also increasing the focus on timely, transparent and independent private asset valuations. As the SEC advances proposals to expand retail investor access to private markets, it has also reinforced its expectations regarding valuation practices and investor disclosures. In a September 2026 Staff Statement, the SEC highlighted a 60% increase in private credit investments held by registered funds between 2020 and 2025, emphasizing the importance of rigorous fair value determinations and meaningful investor disclosures. The statement also reinforced that delays in borrower financial reporting do not diminish a fund’s valuation responsibilities and that reasonably available market information must be considered. This heightened regulatory focus is encouraging fund managers to strengthen valuation governance, increasingly through the use of independent valuation providers and more frequent assessments of fair value.

Outside the U.S., the UK Financial Conduct Authority’s (FCA) March 2025 review of private market valuation practices identified opportunities to strengthen valuation independence, manage conflicts of interest and formalize ad hoc valuations during market or asset-specific events. Its findings reinforce the importance of processes that address the risk of stale valuations between scheduled reporting dates. Additionally, its October 2026 review of conflicts of interest in private markets reinforced the need for independent challenge and robust valuation oversight, particularly in transactions involving competing investor interests. These developments underscore the importance of valuation processes that support timely decisions, manage conflicts and provide a documented basis for reported values.

See also: The Shift to More Frequent Valuations: What’s Driving Demand and What It Means for Managers

Daily valuation processes should be tailored to the fund’s structure, assets and applicable requirements, but consistent application of policies and procedures is essential. Managers should consistently apply documented policies and procedures for incorporating fundamental performance, market updates, litigation and regulatory developments, strategic transactions and other relevant information.

Managers differ in how they share fundamental information. Some continuously share new information on underlying private investments for prompt assessment. Other managers provide fundamental information updates once or twice per month at specified time periods for coordinated model refreshes. Regardless of the reporting schedule, managers should continuously evaluate the materiality of new information and its potential effect on reported values, with material developments assessed and reflected promptly rather than deferred until the next scheduled update.

Before implementation, managers should define how new information will be monitored and escalated, assign review and approval roles and establish documentation requirements. Policies should also address delayed or unavailable information, pricing challenges and the rationale for maintaining or changing a mark. The trigger-event framework should support prompt assessment of material developments between formal reporting periods.

For daily pricing engagements, the manner in which managers interface with Lincoln’s independent range of values is highly variable. Some managers change their concluded marks daily; others retain a prior mark when a current assessment supports it as representative of fair value. Fair value remains the objective under each approach; the frequency of independent support does not change the manager’s responsibility at each valuation date. The exhibit below outlines the most common approaches undertaken by managers reporting daily fair values.

Daily updates allow fundamental information to be incorporated as it becomes available, rather than at the end of a reporting period. Each daily mark should reflect relevant information that is known or reasonably knowable as of the valuation date, including its material valuation effects, rather than waiting for a monthly or quarterly reporting cycle. This requires timely assessment and documented judgment. Regardless of the processes and policies decided upon between a manager and third-party valuation service provider, consistent application and clear documentation will be the most important governance factors in the face of any dispute or regulatory scrutiny.

Backtesting should form part of the governance framework for daily valuations without requiring a full retrospective analysis every day. Managers should retain daily marks, key inputs, information receipt dates and the rationale for overrides and compare prior valuations with subsequent relevant, orderly transactions, such as investment sales, financing rounds or secondary trades. In a daily process, the review should assess not only the level of prior marks but also whether new information and market movements were reflected on a timely basis. Where transaction evidence is limited, comparisons with periodic full valuation refreshes can provide additional validation but are not a substitute for transaction-based backtesting.

A shift in the fair value of an asset is driven by new fundamental information and market-based inputs. In stable market environments, valuations are driven primarily by new fundamental information, typically only available on a monthly or quarterly basis; however, market-based inputs remain an important consideration.

Lincoln International’s Private Market Index (LPMI) illustrates that private markets are, on average, less volatile than public market measures. If private markets remain reasonably stable, valuations should not change drastically on an intraperiod basis, absent material company-specific or idiosyncratic changes.

In 2026, fair value ranges in the private markets were impacted by ongoing tariff announcements, geopolitical uncertainties and the threat of AI disruption leading to a software sell-off in the public markets. Market information should be assessed at each valuation date, with heightened attention during periods of volatility. Trigger definitions and thresholds should capture company-specific developments and market movements that could meaningfully change valuations, taking into account fund policies, asset characteristics, information availability and agreed engagement procedures. Representative fundamental and market-driven events are outlined below. “Materiality” is rarely specifically defined. Rather, factors are considered and evaluated on a case-by-case basis.

Valuations should incorporate relevant, reasonably available market inputs, with representative inputs by asset class outlined below.

Considerations for asset-based finance (ABF): ABF spans different risk and cash-flow profiles. Some investments can be valued similarly to direct lending, using expected payments and a market-required yield that reflects credit quality and collateral coverage. More complex structures require asset- or tranche-specific cash-flow models that capture payment waterfalls, amortization, prepayments, defaults and recoveries. These features affect the amount, timing and allocation of cash flows and the investment’s exposure to changing rates and spreads. Daily review should assess both cash-flow assumptions and discount-rate inputs, including how updated prepayment expectations or a waterfall trigger could change a tranche’s value even when no new borrower financial statements are available.

Lincoln has also observed increased secondary trading activity in individual loans and other portfolio company securities. These trades can provide additional evidence for daily valuations. The weight given to a trade should reflect its relevance and circumstances, including recency, size and whether the transaction was orderly. A limited or distressed trade should be assessed in context rather than automatically adopted or disregarded.

See also: Direct Lending’s New Price Discovery: What Rising Secondary Trading Activity Means for Valuations, Liquidity and Market Transparency

Compared with public markets, private markets offer fewer directly comparable benchmarks to inform valuations. However, a number of data providers, including Lincoln International, publish research and indices that offer insight into private capital markets and inform valuations across reporting frequencies.

Our comprehensive client portal, Lincoln Lens, draws on more than 25,000 portfolio company valuations performed each year. Lincoln’s coverage includes approximately 30% of all U.S. private equity-backed companies. The platform provides insights into transaction multiples, fundamental performance trends and private capital market trends. Lincoln’s data and research offer several avenues to benchmarks beyond public indices, which differ from private markets in structure and trading characteristics. Lincoln’s bimonthly Private Credit Snapshot, for example, provides observations on going-market pricing and leverage levels in direct lending deals. In addition to Lincoln Lens and the Private Credit Snapshot, the jointly developed S&P Lincoln Senior Debt Indices offer monthly private credit benchmarks built on the same private asset classes. For private equity, the LPMI measures quarterly changes in the enterprise values of private companies, providing a complementary benchmark. For managers that require daily valuations, these resources provide highly relevant and timely information. A third-party valuation provider can provide meaningful input and guidance but does not replace the responsibilities of the fund’s board, valuation designee or manager, as applicable.

Systems designed for quarter-end valuations may rely on manual processes that are difficult to scale to daily production and can introduce input or logic errors. These legacy valuation systems are ill-equipped for daily valuations, and building a capable system requires a steep investment.

For fund managers seeking to switch to a daily valuation cadence, relying on a modern system will be a critical shift, particularly one able to quickly update large batches of valuation models with new market data consistently. Managers moving to daily valuations need modern systems that can quickly and consistently update large batches of valuation models with new market data. They can develop these capabilities in-house or work with a third-party valuation provider. Either approach requires cloud-based models with scalable automation and an experienced team with deep, real-time market knowledge. Technology can streamline data sharing and information dissemination and support consistent, accurate application of market inputs across portfolios.

Lincoln supports these requirements through its experience delivering daily valuations and its technology infrastructure, including LincolnArc, its Anaplan-based valuation platform, and Lincoln Lens, its client portal. This combination brings scalable valuation workflows, private market data and experienced professionals together, with human judgment and review remaining central to the process.

Emerging AI tools are also proving helpful in daily monitoring of public information on portfolio companies and ingestion of new fundamental information into valuation models. Outputs should be validated, and material valuation decisions should remain subject to human review. Automation and AI can accelerate these processes but do not replace human judgment in assessing the relevance and reliability of information or making valuation decisions.