Private assets are moving into investment products historically associated with more liquid public market investments. The growth of private credit, private equity and other alternative strategies has accelerated development of registered and broadly distributed vehicles designed to provide a wider range of investors with private market exposure.
Interval funds and tender offer funds are among the structures receiving increased attention. But placing private assets into a registered vehicle does not eliminate the underlying investments' valuation, liquidity and information challenges.
That tension is at the center of a September 28, 2026, SEC staff statement addressing fair value measurement and disclosure considerations for private assets. While the statement does not establish new accounting requirements, it provides a useful roadmap to areas receiving increased attention, particularly private credit valuation, Level 3 disclosures, portfolio credit performance and the use of NAV as a practical expedient.
The SEC notes that private credit assets held by registered investment companies have increased nearly 60% in recent years, growing from approximately $170 billion in 2020 to $270 billion in 2025. As portfolios become increasingly concentrated in private credit and other illiquid instruments, the challenges associated with fair value measurement become more pronounced.
Private equity, private credit, venture capital, real estate and other alternative strategies can provide exposure to investments and sources of risk and return that differ from traditional public markets. Broader access, however, does not change the underlying characteristics of those investments. Private assets may have limited secondary markets, significant valuation uncertainty, less frequent financial information and extended holding periods.
Integrating private assets into a broadly distributed or registered vehicle requires investment managers and boards to reconcile the characteristics of the underlying investments with the liquidity, valuation, reporting and governance expectations of the fund structure. There are many factors to consider here, including:
Unlike publicly traded securities, private debt and equity instruments generally lack observable market quoted prices and, therefore, often require the use of significant unobservable inputs. As a result, these instruments are frequently categorized as Level 3 assets within the fair value hierarchy established by FASB ASC Topic 820 (ASC 820). The SEC has emphasized several items below pertaining to valuation of these instruments:
One of the most significant items from the statement is that investors need to have transparency into how the fair value was determined and the uncertainty surrounding it. Notably, the staff’s comments extend beyond valuation methodology and into the quality of portfolio disclosures.
The SEC staff reiterated the importance of clear, entity specific disclosures regarding valuation methodologies, significant unobservable inputs and measurement uncertainty. Beyond required fair value disclosures, the staff highlighted portfolio characteristics that may be material to an investor’s understanding of credit quality and reported income, including:
As private credit portfolios mature and market conditions evolve, investors may place increasing emphasis on these indicators when assessing risk. The composition of income may be as important to investors as its amount. Increasing reliance on PIK may warrant greater transparency regarding the sustainability of income and changes in underlying borrower credit risk.
ASC 820 permits the use of investee reported NAV as a practical expedient when specified conditions are met. The SEC staff emphasized, however, that management remains responsible for determining whether those conditions continue to be satisfied and that use of the practical expedient is optional on an investment-by-investment basis.
As secondary markets for private fund interests continue to develop, management should consider reasonably available information when evaluating whether an investee's reported NAV has been calculated consistently with the measurement principles of ASC 946. Secondary market activity, changes in market conditions, and information about the investee's valuation policies and controls may all inform that assessment.
A secondary market transaction at a discount to NAV does not, by itself, mean NAV is inappropriate. Rather, it may represent additional information that management should evaluate and document as part of an evidence based assessment of whether the criteria for using the NAV practical expedient continue to be met.
Private asset valuations are also likely to remain an area of significant audit attention. Auditors will evaluate management’s valuation methods and significant assumptions, the reliability of underlying data, and whether available evidence supports or contradicts management’s conclusions. Changes in market conditions, borrower performance, secondary market activity, or portfolio credit quality may require reassessment of valuation risks and the nature and extent of audit evidence needed.
Expanding access to private assets through public vehicles creates meaningful opportunities, but it also increases the importance of disciplined valuation, governance and disclosure. Investment managers and boards should consider:
A public wrapper does not change the private nature of the underlying assets. Their liquidity constraints, information limitations and valuation challenges remain. Successful products will require governance, operations, valuation processes, disclosures and investor liquidity frameworks designed around that reality.
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In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.