medium · Frm Part 2 Current Issues
What is the primary reason why 'Manager-Marked' valuations in private credit are criticized by systemic risk regulators (e.g., the FSB)?
- They are based on SEC-mandated formulas that are outdated for the current interest rate environment.
- They are too volatile and cause unnecessary panic in the repo markets.
- They allow for 'Loss Forbearance', where managers avoid marking down loans despite clear evidence of borrower deterioration.
- They prevent the fund from charging any performance fees until the loans are fully repaid.
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