Private asset markets are facing growing scrutiny over how investments are valued and how accurately those valuations reflect underlying economic reality. Here, we briefly examine four important questions around valuation: how private assets are valued, whether appraisal-based valuations adequately capture risk, how regulation is evolving, and what realised exits tell us about the accuracy of reported values.

When valuation creates an illusion of stability

Private market valuations are often unreliable – infrequently updated, rarely independent and structured to smooth away volatility that doesn’t disappear.

Blackstone’s Real Estate Investment Trust illustrates the problem: its appraisal-based NAV barely moved during the COVID shock and 2022-23 rate cycle while comparable listed REITs fell by around a third of their value.

The consequences ripple across the institutional landscape because calculations at every level are based on estimates that do not reflect reality.

Valuation discipline is essential, not an accounting technicality, and requires procedural reform – minimum revaluation frequencies, event-triggered re-marking and independent valuation committees.

Underestimating volatility in unlisted infrastructure

Appraisal-based valuations systematically understate unlisted infrastructure volatility, producing implausibly high Sharpe ratios and misleading assessments of risk. Some 20 years of transaction data reveal true total-return volatility of 7-12% – several times appraisal figures.

Risk stems from three sources: revisions to expected cash flows, interest-rate movements and shifts in the infrastructure risk premium, none of which appraisals capture reliably.

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.

A changing regulatory landscape

Across major regulatory regimes, valuation is finally beginning to be treated as a governance and accountability issue, not merely a technical or back-office function.

Supervisory scrutiny concentrates on open-ended and semi-liquid funds, continuation vehicles, retail wrappers and superannuation arrangements, where stale valuations directly affect investor fairness.

IOSCO, the FCA, Luxembourg’s CSSF and Australia’s APRA/ASIC set out the most detailed operational expectations; the US, though lacking a current rule, remains actively engaged.

Common expectations include named accountability, functional independence, trigger-based revaluation, model validation and a tested pathway from pricing error to investor remediation.

What do realised exits tell us? 

Valuations of private assets systematically understate exit prices across both private equity and infrastructure.

Exit uplifts have fallen since 2022 relative to the 2015-21 period. Median private equity exit uplifts fell from 23% to 17.6%. Exit uplifts decline as the hold period increases, from a median of 48% for assets exited under three years, to near zero for exits held for seven-plus years.

Valuation findings have implications for DC pension plans and evergreen funds where value transfers occur if assets are mispriced.