Retail access to non-public credit and personal equity strategies is increasing worldwide. These assets may offer the potential for diversification and return, but involve risks which might be fundamentally different from those of public markets.
The most underestimated factor is the evaluation delay.
Unlike publicly traded assets, that are continually valued at market value, private assets are typically valued in response to a model and updated usually. During periods of volatility, reported net asset values ​​may lag significantly behind economic reality.
This raises two concerns. First, reported performance may appear smoother than that of the underlying risk warrants. Second, stale prices can create arbitrage opportunities: informed investors should buy back at stale valuations and pass on losses to those remaining once adjustments are made.
Recent market events suggest that retail investors are sometimes less prepared for the illiquidity, gating mechanisms and valuation flexibility of personal strategies. Strong valuation governance is subsequently essential.
Independent oversight, regular external reviews and transparent disclosure of methods aren’t procedural formalities. They protect against unfair results and a lack of investor confidence.
