Establishing a robust valuation framework for private debt as a growing and maturing asset class will be critical from a regulatory and investor reporting standpoint, according to a report from the European Leveraged Finance Association (ELFA) and Houlihan Lokey.
The Insights report, Valuation of Private Debt Investments, aims to provide a primer to the methodologies and practical considerations faced by valuation practitioners when assessing private debt instruments.
The European private debt market has experienced significant growth from EUR8 billion in 2012 to EUR120 billion in 2020, with the asset class increasing in importance within investors’ portfolios. The report highlights that this growth, alongside the illiquidity of the underlying instruments and increasing scrutiny from investors, regulators and auditors, requires best practices and consistent standards in the valuation of private debt.
ELFA and Houlihan Lokey highlight that as the asset class matures, matters such as valuation are increasingly scrutinised suggesting some obvious benefits in further streamlining practices across the European market and incorporating fair value elements for additional comparability with the more mature market in North America.
