Who Is Challenging the Valuation?

What MAS’s findings mean for private market fund managers

In May 2026, the Monetary Authority of Singapore (MAS) published an information paper on valuation practices for fund management companies (FMCs). The paper sets out MAS’s expectations across four areas: governance, policies and procedures, ongoing price validation, and valuation approaches and methodologies. It draws on inspections of selected fund managers across several investment strategies, with some inspections conducted by external auditors appointed by MAS.

Although the paper covers a broad range of funds, several findings are particularly relevant to managers of private equity, venture capital and private credit funds. Investments held by these funds are often classified as Level 3 because their valuations rely significantly on unobservable inputs and professional judgement, including forecasts, portfolio company or borrower information, capital structures, proxy benchmarks and expected exits or recoveries.

For private market fund managers, the findings highlight six areas to consider when assessing whether valuations are properly supported and challenged.

1. Governance must provide effective challenge

MAS found that some smaller fund managers appointed senior managers involved in portfolio management to oversee the valuation of certain assets, creating potential conflicts of interest. Some valuation committees also lacked formal or sufficiently detailed terms of reference.

Deal teams often have the best knowledge of an asset, but they are also involved in the original investment decision and its ongoing management. Their input is important, but the resulting valuation should be reviewed outside the deal team.

Those reviewing the valuation need sufficient expertise, information and authority to question the methodology and material assumptions. They should be able to request further analysis and escalate matters that cannot be resolved.

The key test is whether the governance process results in informed challenge and a clear record of how material judgements were resolved.

2. Policies must reflect the investments held

MAS expects valuation policies to cover all relevant asset classes and financial instruments. Its inspections found cases where firms did not follow their policies, did not explain deviations or failed to keep policies aligned with current practice.

For a private market fund, a general requirement to measure investments at fair value may not provide enough practical guidance. The policy should address the instruments and risks in the portfolio, including different equity rights, convertible instruments, impaired private credit exposures, collateral and complex capital structures.

It should also set out responsibilities, approved approaches, review frequency, escalation requirements and the treatment of exceptions. Additional review may be needed following a financing round, restructuring, covenant breach, material underperformance or change in expected exit or recovery.

The policy needs to convert valuation principles into procedures that can be applied consistently to the fund’s investments.

3. Portfolio company and borrower information must be tested

MAS found that several fund managers did not critically assess information supplied by portfolio companies prior to using it in their valuation models.

Private market valuations commonly rely on financial statements, forecasts, budgets, cap tables, operating metrics and collateral information provided by portfolio companies or borrowers. This may be the most recent information available, but it should still be reviewed.

Checks may include comparisons with historical results, audited financial information and previous forecasts. Material forecast shortfalls, inconsistencies or changes in assumptions should be understood before the information is used.

The information does not always need to be produced independently. However, the manager should be able to explain how the information was assessed and how any limitations were reflected in the valuation.

4. Validation should test the supporting evidence

MAS expects fund managers to cross-check key valuation inputs and assumptions against independent data and relevant benchmarks where appropriate.

For Level 3 investments, there may be no quoted price against which to check the valuation. Validation therefore needs to examine the evidence supporting the result.

For venture capital, a recent funding round may provide useful evidence, but its terms, investor rights and circumstances should be understood before the transaction price is applied to other share classes. For private equity, validation may cover forecasts, comparable companies and changes in market multiples. For private credit, it may cover expected cash flows, credit spreads, collateral values and recovery assumptions.

The valuation policy should state who performs these checks, how differences are investigated and when issues need to be escalated. The objective is not simply to produce another number.  It is to test whether the valuation is properly supported.

5. Methodologies must respond to new information

MAS identified one case in which a fund manager reclassified restructured non-performing loans as performing without making corresponding valuation adjustments. MAS reported that this overstated NAV and resulted in excessive management fees.

This shows the risk of leaving the valuation unchanged when the economics of the investment have changed.

For private credit, a covenant breach, restructuring, deterioration in borrower performance or change in expected recovery may affect cash flows, discount rates, scenarios, collateral analysis and the choice of methodology.  For private equity and venture capital, a new financing round, revised forecast, shorter cash runway or change in exit expectations may also require the valuation approach to be reconsidered.

Consistency is important, but it should not prevent a justified change.  Any decision to change or retain the methodology should be supported, challenged and documented.

6. The role of external providers must be clear

MAS found that most inspected firms used external valuers or fund administrators to support valuation or NAV reporting. It also identified weaknesses in the selection and oversight of some providers, including their independence, expertise and valuation methodologies.

Different providers perform different roles. A fund administrator may calculate NAV using values supplied by the manager. An external valuation specialist may independently review selected assets, inputs or assumptions. An auditor reviews valuations for financial reporting purposes.

Managers should therefore understand the scope of each provider’s work, the information received from the deal team and the material judgements that fall outside that provider’s scope.

A clearly defined scope enables an external valuation specialist to provide focused, independent challenge over the assets, inputs and assumptions presenting the greatest valuation risk.

Questions for private market fund managers

• Who is accountable for each material valuation, and does the reviewer have the independence and capability needed to challenge it effectively?
• Do the valuation policies reflect the investments and risks in the current portfolio, and is there evidence that they are followed in practice?
• How are portfolio company and borrower information, key assumptions and other Level 3 inputs tested, and how are identified limitations reflected in the valuation?
• What developments trigger reassessment of the valuation, and how are the resulting decisions challenged, approved and documented?
• How are valuation differences, exceptions and overrides investigated, escalated and resolved?
• Where an external provider is involved, what has it assessed independently, and how are its independence, expertise, methodology and performance evaluated?

Why this matters

A private market valuation should be able to withstand scrutiny. That requires reliable information, appropriate methodologies, clear accountability and effective challenge of material judgements.

Weaknesses in these areas can affect NAV, performance, fees and investor reporting. MAS expects FMCs to benchmark their valuation arrangements against its supervisory expectations and promptly address any gaps identified. 

Managers should therefore be able to explain not only how a valuation was calculated, but also how its key assumptions were tested and significant differences or exceptions were resolved.

S&P Global Private Market Valuations provides independent valuations and assurance reviews to help FMCs strengthen the review and challenge of private equity, private credit and other Level 3 valuations.