Private Markets Face Valuation Crunch Amid AI and Regulatory Pressure

Fund groups are witnessing a dramatic shift in asset allocation, with private equity holdings reaching 51% and private credit 33% among respondents. This growth has forced a re-evaluation of pricing models. While 69% of firms now rely on third-party providers for private credit spot prices, only 4% perform daily updates that account for unobservable inputs and cash flow assumptions. Most firms still default to a quarterly cadence for these complex judgments.

Technological integration is moving at pace, particularly with artificial intelligence. Approximately 77% of surveyed participants have increased their AI usage over the past year. Beyond basic documentation, 40% of these firms are applying AI tools directly to fair valuation processes. However, this innovation arrives alongside heightened scrutiny from the SEC. Valuation policies were a focal point for 53% of firms that underwent an audit in the last year, with regulators increasingly questioning the methodology and frequency of pricing for private assets.

Paul Kraft, lead partner at Deloitte & Touche LLP, emphasizes that the era of simple valuation is over. Navigating this landscape requires a delicate mix of automated efficiency and human-led governance. As firms launch more alternative products, the industry must reconcile the push for daily pricing with the reality of assets that are inherently difficult to value.