This special private assets investment edition of the EDHEC Infrastructure & Private Assets Research Institute supplement to Investment & Pensions Europe focuses on the global private assets market. This is an industry that is navigating one of its most consequential periods in decades, and the questions that institutional investors are asking have rarely felt more urgent. The conventional wisdom on private assets is being tested on multiple fronts. This supplement provides insight into the most pertinent findings from our research team. Our analysts examine some of the fault lines in private asset investment assumptions – and what the evidence actually shows.

Our first article takes a look at popular methods for valuing private assets – and the many problems they present, often systematically unreliable, updated too infrequently, rarely truly independent, and structured to smooth away volatility that doesn’t actually disappear. Investors need a shift away from this illusion of fair valuation; we argue for procedural reform, delivering more reliable estimates with minimum revaluation frequencies, event-triggered re-marking, and independent valuation committees. Valuation governance is not a box-ticking exercise; it should be treated as a systemic safeguard rather than an accounting technicality.

Next, we take a look at the constant underestimation of volatility in unlisted infrastructure investments that is delivered by appraisal-based valuations. These all too frequently produce implausibly high Sharpe ratios and misleading assessments of risk. We reveal that true total-return volatility is several times the guesstimates of appraisal figures. A realistic volatility estimate is not a technical refinement; it changes the decisions institutions make and reshapes the role of infrastructure across the institutional landscape.

In our third piece we summarize developments in the regulation of valuations. There is good news here for investors, as valuation is finally beginning to be treated as a governance and accountability issue, not merely a technical or back-office function. Many of the most significant global regulatory bodies are taking a proactive approach, and expectations for mandatory requirements include named accountability, functional independence, trigger-based revaluation, model validation, and a tested pathway from pricing error to investor remediation. IOSCO, the FCA, Luxembourg’s CSSF, and Australia’s APRA/ASIC set out the most detailed operational expectations; the US, though lacking a current formal rule, remains actively engaged.

Our final paper looks at another concerning valuation issue for investors: private asset valuations systematically understate exit prices in every year of the decade studied. And by no small amount – median uplifts are around 20%, in breach of fair value principles. We warn that this mispricing poses growing fiduciary and regulatory risks. Because the trusts studied invest through many of the world’s leading private asset managers, the findings are indicative of industry-wide practice. Routine back-testing of carrying values against realized exits should be a standard component of valuation governance.