How a Sovereign Wealth Fund Removed Valuation Bias and Scaled to Complete 100+ Semi-Annual Private Credit Reviews

As part of its long-term diversification strategy, the Sovereign Wealth Fund (“SWF”) rapidly expanded its private credit portfolio. However, its internally developed credit scoring framework lacked validation against robust default and transition data. This limited the valuation team’s ability to challenge investment team assumptions across a growing number of complex, unrated positions.

By working with S&P Global Market Intelligence, the SWF implemented a scalable and independent validation framework. This enabled 100+ credit risk assessments every six months, strengthening valuation governance and equipping the valuation team to assess risk with valuable independent insights.

Challenge

The SWF’s private credit portfolio - spanning bilateral direct lending, broadly syndicated loans, project finance, and other complex structures — grew rapidly in size and complexity. However:

• Internal credit scores had not been validated against external default or transition datasets.
• Valuations relied heavily on investment teams inputs, introducing potential bias.
• The valuation team lacked the capacity and specialized expertise to independently review hundreds of positions at scale.
• Building an in-house credit risk function would require significant time and investment.

As the portfolio expanded, the need for a robust, scalable, and defensible valuation framework became critical.

Solutions

To address these challenges, the SWF engaged S&P Global Market Intelligence to deploy:

• Credit Risk Assessments (CRA) through managed services,
• Private Credit Valuation capabilities.

This integrated solution combined:

• Industry-standard scorecard models broadly aligned with S&P Global Ratings’ methodologies and criteria.
• A dedicated team of experienced credit analysts.
• A structured process embedded within the fund’s semi-annual valuation cycle.
• Accelerated onboarding timeline with weekly engagement to resolve data gaps and ensure alignment with stakeholders.

The CRA has become a critical input and a proxy for private credit valuation — whenever there is a downgrade, the SWF needs to understand the financial impact in terms of the change in valuation. The end-to-end solution provides clarity, transparency and speed to address the issue.

Outcome

Quantitative:

• 100+ complex positions independently reviewed and valued every six months.
• 4-month onboarding timeline, avoiding the cost and delay of building internal capabilities.
• 2.5-month streamlined recurring cycle supporting consistent valuation and reporting.

Qualitative:

• Eliminated valuation bias: Independent, data-driven credit assessments using transparent, industry-standard methodologies —providing highly defensible input parameters for valuation.
• Enhanced team effectiveness: The valuation function is empowered to challenge risk assessments with independent support by experienced credit analysts.
• Strengthened governance: The SWF established a robust and scalable valuation framework aligned with industry best practices.

Key Takeaway

By collaborating with S&P Global Market Intelligence, the SWF transformed its valuation and risk management capabilities.

What began as a capacity constraint evolved into a strategic upgrade, replacing internal bias with independent, data-driven methodologies and establishing a scalable and robust governance framework.

The result is a private credit valuation process that is defensible, transparent, and built to scale alongside portfolio growth.