Conclusion first
A private credit mark is a Level 3 measurement: it rests on unobservable inputs and therefore on judgement. Wherever there is judgement, the incentives of whoever exercises it matter — which is why independence, not methodology alone, is the foundation of a defensible valuation. The first question an auditor or an LP asks is not “what is the number?” but “who set it, and what was their stake in it?” A valuer with no interest in the outcome clears that question by construction.
Where conflicts arise
- Self-marking. The fund values its own positions. Higher marks flatter performance, fundraising and fees — a structural pull on every judgement call, however well-intentioned.
- Transaction-side relationships. A valuer that also advises on M&A, restructuring or capital markets holds commercial relationships with the same issuers it marks. The mark and the mandate are not cleanly separable.
- Fee-linked incentives. Any arrangement where the valuer’s compensation moves with the level of the mark — or with winning the next engagement — biases the result.
- Data and reference-source bias. A valuer that profits from selling the inputs it also marks against has an interest in how those inputs are used.
How delivery models differ on conflict
| Model | Conflict surface |
|---|---|
| In-house / self-marked | Direct — performance and fees move with the mark the fund sets itself |
| Full-service advisory valuer | Indirect — other mandates (M&A, restructuring) with the same issuers |
| Operations platform with a valuation module | Diffuse — valuation is secondary to a broader commercial relationship |
| Valuation-only engine | Minimal — no transaction interest, no performance-fee linkage |
What genuine independence requires
- No stake in the outcome. No performance-fee linkage, no transaction mandate with the issuer, no compensation tied to the level of the mark.
- Separation of valuation from client-facing roles. The people who set marks are not the people who sell to, or negotiate with, the counterparty.
- Reference-data neutrality. Inputs are sourced without an interest in how they move the result.
- Disclosure and a conflicts register. Any residual conflict is recorded and disclosed, not managed informally.
Where Verus sits
Markst operates Verus as a valuation-only provider: no transaction- side interest in the positions it marks, no performance-fee linkage, and reference-data neutrality by policy. The deterministic method reinforces the posture — because every figure is an input or a documented default and every override is traced, there is no quiet place for a biased judgement to sit. Markst’s full posture — personal-account dealing, outside business activities, the conflicts register and the escalation path — is published in the conflicts-of-interest policy.
Related
- What makes a valuation audit-ready — independence is one of the five tests.
- Valuation approaches — how the delivery models compare on more than conflict.
- Conflicts-of-interest policy — Markst’s formal posture in full.
- Methodology — the governance surface behind every mark.
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