Daily Valuations Help Position Private Credit Funds for Their Next Stage of Growth

Private credit has become one of the fastest-growing segments of alternative investments, driven in part by banks' evolving capital requirements and growing demand among investors for income-oriented strategies. As private credit managers expand their focus beyond institutional investors to defined contribution plans, one operational requirement  is drawing increased attention: the need for independent-third party daily valuations. 

The opportunity is substantial. With approximately $14 trillion in U.S. defined contribution assets, even modest allocations to private credit could direct hundreds of billions of dollars into the asset class over time. Regulators have also signaled greater openness to expanding access to alternative investments in retirement plans, prompting major fund managers to develop structures designed for a broader investor base. 

For managers pursuing this opportunity, daily valuations will be required to facilitate daily transactions when investors are buying into or selling out of funds in their retirement vehicles.  

Meeting the Expectations of Defined Contribution Investors 

Historically, many private credit vehicles have been valued monthly or quarterly to  facilitate  financial reporting for institutional investors, to provide clarity around the performance of the investment and to establish redemption values. A move to a daily mark will be required  to establish the fund value for retirement investments that can occur on any day of the month.  

“Defined contribution plans operate on a different timetable, requiring daily valuation because investors can move in and out of their funds at any time,” said Thomas Dial, Managing Director, Commercial Real Estate Debt Valuation at SitusAMC. “We are providing the same institutional valuation process that's traditionally performed monthly or quarterly, but we're doing it every day.” 

The move toward daily valuations also aligns with broader market expectations for greater transparency and timely reporting. More frequent mark-to-market valuations provide investors with current information about portfolio value while supporting strong governance and consistent valuation practices. 

For retirement investors, private credit offers attributes that have made the asset class increasingly attractive, including income generation, portfolio diversification and exposure to CRE debt that has historically been available primarily to institutional investors. As access expands, valuation practices are evolving to support those investment structures. 

Specialized Expertise Matters 

CRE debt presents unique valuation challenges because individual loans rarely trade in secondary markets. Fair value must be determined by the fund manager or through an independent third party  rather than readily available market prices. 

“To establish a fund NAV you value the asset (CRE loans), subtract the value of the debt, and that gives you the value of the equity,” Dial said. “But these loans don't trade regularly, so you should go to an independent third party to receive valuations. It is a best practice and increases investor confidence and investment.” 

Producing those valuations requires a detailed understanding of the underlying collateral, loan structures, borrower performance, capital markets and property fundamentals. Changes in leasing activity, interest rates, capitalization rates and market conditions all influence value and require ongoing analysis. 

Delivering this process on a daily basis demands both disciplined valuation methodologies and access to current market intelligence. 

A Broader View of the Market 

Because CRE debt is largely a private market, much of the information needed to determine fair value is not publicly available. 

“Our clients tell us exactly what's happening with every loan they're asking us to value,” Dial said. “Across dozens of lenders and thousands of loans, that gives SitusAMC an incredibly broad view of what's happening throughout the market.” 

SitusAMC combines that proprietary market intelligence with public market data, property research and valuation expertise to develop independent fair value opinions. 

The firm's valuation professionals analyze activity across approximately 3,000 commercial real estate loans representing more than $150 billion in outstanding balances. That breadth of information provides valuable perspective across property types, geographies and capital structures, helping place individual loans within the context of broader market activity. 

Built Around Commercial Real Estate Debt 

As daily valuations become more common for private credit funds, selecting a valuation provider with deep CRE expertise is increasingly important. “We are a vertically integrated organization focused on commercial real estate," Dial said. “It's in our DNA.” 

That specialization extends across SitusAMC's CRE platform, including appraisal, research and market intelligence capabilities that provide additional insight into underlying collateral and changing market conditions. 

Unlike firms that value a broad range of financial assets, SitusAMC's commercial real estate debt valuation practice is dedicated exclusively to this market. 

“This is what we do all day long,” Dial said. “Our understanding of the debt markets, the underlying real estate and what's happening across thousands of loans allows us to triangulate value in a way that's difficult to replicate.” 

Supporting the Expansion of Private Credit 

Private credit managers continue to introduce new investment vehicles designed to meet growing demand from a broader range of investors. Daily, independent valuations help support those efforts by providing the transparency, consistency and governance expected in defined contribution investing. 

For CRE debt funds preparing to serve retirement investors, reliable valuation processes help strengthen investor confidence while supporting sound portfolio management and informed investment decisions. As private credit continues to expand, institutional-quality daily valuations will play an important role in supporting that growth. 

Learn more about SitusAMC’s CRE Debt and Securities Valuations and Advisory Services here.