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)?

1. They rely on outdated SEC-mandated pricing formulas that no longer reflect the current interest rate and credit environment.
2. They swing too violently from day to day, which regulators fear could needlessly spook lenders in short-term repo funding markets.
3. They allow for 'Loss Forbearance', where managers avoid marking down loans despite clear evidence of borrower deterioration.
4. They effectively bar the fund from collecting any performance fees at all until every underlying loan has been fully repaid.

Sign up free to see the explanation and track your rank →