Valuation Policy
A valuation policy defines how a fund marks its assets, manages conflicts, and reports fair value to LPs.
Definition
Valuation policy sets the framework for determining fair value, including methodologies, frequency of marks, valuation committees, third-party inputs, and escalation processes. In illiquid strategies, valuation policy is central because NAV and interim performance depend on marks that can involve judgment. Allocator Context Allocators evaluate valuation policy as part of diligence and ongoing monitoring. They look for consistency, conservatism, documented processes, and conflict management. Inconsistent or overly aggressive marks can damage credibility and trigger deeper oversight. Decision Authority Valuation policies often involve internal valuation committees and may be subject to audit and LPAC review. Large valuation changes can trigger committee questions and affect portfolio-level exposure decisions. Why It Matters for Fundraising Managers are judged on valuation governance, not only returns. Clear explanation of valuation methodology and controls builds trust and reduces friction in both fundraising and secondary pricing. Key Takeaways Valuation policy drives NAV credibility Governance and consistency matter Conflicts must be managed explicitly Transparency improves allocator trust