Regulators Target Private Credit Valuations: DOJ Investigates BlackRock TCP Capital and Australia's ASIC Orders Valuation Overhaul
In August 2026, the private credit secondary market emerged as a brutal real-world "market test" for unlisted loan valuations, forcing major managers to either scale back transactions or accept significant net asset value (NAV) markdowns.
Ares Scales Back Continuation Fund After Valuation Pushback
Ares Management was forced to drastically shrink a planned €1 billion European private credit continuation vehicle down to approximately €400 million (including roughly €350 million in fair market value of loans plus follow-on capital) after prospective secondary investors demanded steeper discounts on the underlying loans than Ares was willing to accept. Accepting those steeper discounts would have forced Ares to mark down the value of the performing loans on its books.
As noted by LPGP Connect:
"In the Ares deal, the sticking point emerged as institutional investors scrutinized the proposed loan valuations, questioning whether the prices reflected current market realities amid shifting credit conditions and economic uncertainty. Disagreement over pricing made it impossible for Ares to secure the critical mass of commitments needed to complete the €1 billion fundraising target."
The transaction highlights a growing structural standoff. A secondary market participant quoted by the Financial Times noted:
"We don’t want the market to think these are assets that nobody wanted. Many of these are performing loans. We use continuation vehicles for liquidity purposes, it’s not a fire sale."
BlackRock's TCP Capital Executes $523 Million Portfolio Reset
Concurrently, on August 6, 2026, BlackRock TCP Capital Corp (TCPC) announced a massive portfolio sale to a continuation vehicle backed 95% by secondary specialist Pantheon. The $523 million transaction covers 48% of TCPC's debt portfolio across 78 companies. While the deal successfully cuts the fund's leverage from a highly pressured 1.38x to an expected 0.4x, it comes at a steep valuation cost: TCPC expects its NAV to decline by 10.4% ($0.68 per share) as a direct result of the transaction pricing. Alongside the sale, TCPC's board hired Keefe, Bruyette & KBW to explore strategic alternatives.
These events demonstrate that continuation funds—originally designed as a niche liquidity tool—are turning unlisted accounting marks into transparent, transaction-tested valuations, exposing the gap between manager-reported "held-to-maturity" valuations and what third-party secondary buyers are actually willing to pay.