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Valuation Timing for Illiquid Investments
For asset owners and investment firms managing private equity, real estate, or other illiquid assets, one of the most persistent challenges in performance reporting is determining the right approach to valuation timing. Accurate performance results are essential, but delays in receiving valuations can create friction with timely reporting goals. How can firms strike the right balance?
At Longs Peak Advisory Services, we’ve worked with hundreds of investment firms and asset owners globally to help them present meaningful, transparent performance results. When it comes to illiquid investments, the trade-offs and decisions surrounding valuation timing can have a significant impact—not just on performance accuracy, but also on how trustworthy and comparable the results appear to stakeholders.
Why Valuation Timing Matters
Illiquid investments are inherently different from their liquid counterparts. While publicly traded securities can be valued in real-time with market prices, private equity and real estate investments often report with a delay—sometimes months after quarter-end.
This delay creates a reporting dilemma: Should firms wait for final valuations to ensure accurate performance, or should they push ahead with estimates or lagged valuations to meet internal or external deadlines?
It’s a familiar struggle for investment teams and performance professionals. On one hand, accuracy supports sound decision-making and stakeholder trust. On the other, reporting delays can hinder communication with boards, consultants, and beneficiaries—particularly for asset owners like endowments and public pension plans that follow strict reporting cycles.
Common Approaches to Delayed Valuations
For strategies involving private equity, real estate, or other illiquid holdings, receiving valuations weeks—or even months—after quarter-end is the norm rather than the exception. To deal with this lag, investment organizations typically adopt one of two approaches to incorporate valuations into performance reporting: backdating valuations or lagging valuations. Each has benefits and drawbacks, and the choice between them often comes down to a trade-off between accuracy and timeliness.
1. Backdating Valuations
In the backdating approach, once a valuation is received—say, a March 31 valuation that arrives in mid-June—it is recorded as of March 31, the actual valuation date. This ensures that performance reports reflect economic activity during the appropriate time period, regardless of when the data became available.
Pros:
- Accuracy: Provides the most accurate snapshot of asset values and portfolio performance for the period being reported.
- Integrity: Maintains alignment between valuation dates and the underlying activity in the portfolio, which is particularly important for internal analysis or for investment committees wanting to evaluate manager decisions during specific market environments.
Cons:
- Delayed Reporting: Final performance for the quarter may be delayed by 4–6 weeks or more, depending on how long it takes to receive valuations.
- Stakeholder Frustration: Boards, consultants, and beneficiaries may grow frustrated if they cannot access updated reports in a timely manner, especially if performance data is tied to compensation decisions, audit deadlines, or public disclosures.
When It's Useful:
- When transparency and accuracy are prioritized over speed—e.g., in annual audited performance reports or regulatory filings.
- For internal purposes where precise attribution and alignment with economic events are critical, such as evaluating decision-making during periods of market volatility.
2. Lagged Valuations
With the lagged approach, firms recognize delayed valuations in the subsequent reporting period. Using the same example: if the March 31valuation is received in June, it is instead recorded as of June 30. In this case, the performance effect of the Q1 activity is pushed into Q2’sreporting.
Pros:
- Faster Reporting: Performance reports can be completed shortly after quarter-end, meeting board, stakeholder, and regulatory timelines.
- Operational Efficiency: Teams aren’t held up by a few delayed valuations, allowing them to close the books and move on to other tasks.
Cons:
- Reduced Accuracy: Performance reported for Q2 includes valuation changes that actually occurred in Q1, misaligning performance with the period in which it was earned.
- Misinterpretation Risk: If users are unaware of the lag, they may misattribute results to the wrong quarter, leading to flawed conclusions about manager skill or market behavior.
When It's Useful:
- When quarterly reporting deadlines must be met (e.g., trustee meetings, consultant updates).
- In environments where consistency and speed are prioritized, and the lag can be adequately disclosed and understood by users.
Choosing the Right Approach (and Sticking with It)
Both approaches are acceptable from a compliance and reporting perspective. However, the key lies in consistency.
Once an organization adopts an approach—whether back dating or lagging—it should be applied across all periods, portfolios, and asset classes. Inconsistent application opens the door to performance manipulation(or the appearance of it), where results might look better simply because a valuation was timed differently.
This kind of inconsistency can erode trust with boards, auditors and other stakeholders. Worse, it could raise red flags in a regulatory review or third-party verification.
Disclose, Disclose, Disclose
Regardless of the method you use, full transparency in reporting is essential. If you’re lagging valuations by a quarter, clearly state that in your disclosures. If you change methodologies at any point—perhaps transitioning from lagged to backdated—explain when and why that change occurred.
Clear disclosures help users of your reports—whether board members, beneficiaries, auditors, or consultants—understand how performance was calculated. It allows them to assess the results in context and make informed decisions based on the data.
Aligning Benchmarks with Valuation Timing
One important detail that’s often overlooked: your benchmark data should follow the same valuation timing as your portfolio.
If your private equity or real estate portfolio is lagged by a quarter, but your benchmark is not, your performance comparison becomes flawed. The timing mismatch can mislead stakeholders into believing the strategy outperformed or underperformed, simply due to misaligned reporting periods.
To ensure a fair and meaningful comparison, always apply your valuation timing method consistently across both your portfolio and benchmark data.
Building Trust Through Transparency
Valuation timing is a technical, often behind-the-scenes issue—but it plays a crucial role in how your investment results are perceived. Boards and stakeholders rely on accurate, timely, and understandable performance reporting to make decisions that impact beneficiaries, employees, and communities.
By taking the time to document your valuation policy, apply it consistently, and disclose it clearly, you are reinforcing your organization’s commitment to integrity and transparency. And in a world where scrutiny of investment performance is only increasing, that commitment can be just as valuable as the numbers themselves.
Need help defining your valuation timing policy or aligning performance reporting practices with industry standards?
Longs Peak Advisory Services specializes in helping investment firms and asset owners simplify their performance processes, maintain compliance, and build trust through transparent reporting. Contact us to learn how we can support your team.

Key Takeaways from the 2025 PMAR Conference
The Performance Measurement, Attribution & Risk (PMAR) Conference is always a highlight for investment performance professionals—and this year’s event did not disappoint. With a packed agenda spanning everything from economic uncertainty and automation to evolving training needs and private market complexities, PMAR 2025 gave attendees plenty to think about.
Here are some of our key takeaways from this year’s event:
Women in Performance Measurement (WiPM)
Although not officially a part of PMAR, WiPM often schedules its annual in-person gathering during the same week to take advantage of the broader industry presence at the event. This year’s in-person gathering, united female professionals from across the country for a full day of connection, learning, and mentorship. The agenda struck a thoughtful balance between professional development and personal connection, with standout sessions on AI and machine learning, resume building, and insights from the WiPM mentoring program. A consistent favorite among attendees is the interactive format—discussions are engaging, and the support among members is truly energizing. The day concluded with a cocktail reception and dinner, reinforcing the group’s strong sense of community and its ongoing commitment to advancing women in the performance measurement profession.
If you’re not yet a member and are interested in joining the community, find WiPM here on LinkedIn.
Uncertainty, Not Risk, is Driving Market Volatility
John Longo, Ph.D., Rutgers Business School kicked off the conference with a deep dive into the global economy, and his message was clear: today’s markets are more uncertain than risky. Tariffs, political volatility, and unconventional strategies—like the idea of purchasing Greenland—are reshaping global trade and investment decisions. His suggestion? Investors may want to look beyond U.S. borders and consider assets like gold or emerging markets as a hedge.
Longo also highlighted the looming national debt problem and inflationary effects of protectionist policies. For performance professionals, the implication is clear: macro-level policy choices are creating noise that can obscure traditional risk metrics. Understanding the difference between risk and uncertainty is more important than ever.
The Future of Training: Customized, Continuous, and Collaborative
In the “Developing Staff for Success” session, Frances Barney, CFA (former head of investment performance and risk analysis for BNY Mellon) and our very own Jocelyn Gilligan, CFA, CIPM explored the evolving nature of training in our field. The key message: cookie-cutter training doesn't cut it anymore. With increasing regulatory complexity and rapidly advancing technology, firms must invest in flexible, personalized learning programs.
Whether it's improving communication skills, building tech proficiency, or embedding a culture of curiosity, the session emphasized that training must be more than a check-the-box activity. Ongoing mentorship, cross-training, and embracing neurodiversity in learning styles are all part of building high-performing, engaged teams.
AI is Here—But It Needs a Human Co-Pilot
Several sessions explored the growing role of AI and automation in performance and reporting. The consensus? AI holds immense promise, but without strong data governance and human oversight, it’s not a silver bullet. From hallucinations in generative models to the ethical challenges of data usage, AI introduces new risks even as it streamlines workflows.
Use cases presented ranged from anomaly detection and report generation to client communication enhancements and predictive exception handling. But again and again, speakers emphasized: AI should augment, not replace, human expertise.
Private Markets Require Purpose-Built Tools
Private equity, private credit, real estate, and hedge funds remain among the trickiest asset classes to measure. Whether debating IRR vs. TWR, handling data lags, or selecting appropriate benchmarks, this year's sessions highlighted just how much nuance is involved in getting private market reporting right.
One particularly compelling idea: using replicating portfolios of public assets to assess the risk and performance of illiquid investments. This approach offers more transparency and a better sense of underlying exposures, especially in the absence of timely valuations.
Shorting and Leverage Complicate Performance Attribution
Calculating performance in long/short portfolios isn’t straightforward—and using absolute values can create misleading results. A session on this topic broke down the mechanics of short selling and explained why contribution-based return attribution is essential for accurate reporting.
The key insight: portfolio-level returns can fall outside the range of individual asset returns, especially in leveraged portfolios. Understanding the directional nature of each position is crucial for both internal attribution and external communication.
The SEC is Watching—Are You Ready?
Compliance was another hot topic, especially in light of recent enforcement actions under the SEC Marketing Rule. From misuse of hypothetical performance to sloppy use of testimonials, the panelists shared hard-earned lessons and emphasized the importance of documentation. This panel was moderated by Longs Peak’s Matt Deatherage, CFA, CIPM and included Lance Dial, of K&L Gates along with Thayne Gould from Vigilant.
FAQs have helped clarify gray areas (especially around extracted performance and proximity of net vs. gross returns), but more guidance is expected—particularly on model fees and performance portability. If you're not already documenting every performance claim, now is the time to start.
“Phantom Alpha” Is Real—And Preventable
David Spaulding of TSG, closed the conference with a deep dive into benchmark construction and the potential for “phantom alpha.” Even small differences in rebalancing frequency between portfolios and their benchmarks can create misleading outperformance. His recommendation? Either sync your rebalancing schedules or clearly disclose the differences.
This session served as a great reminder that even small implementation details can significantly impact reported performance—and that transparency is essential to maintaining trust.
Final Thoughts
From automation to attribution, PMAR 2025 showcased the depth and complexity of our field. If there’s one overarching takeaway, it’s that while tools and techniques continue to evolve, the core principles—transparency, accuracy, and accountability—remain as important a sever.
Did you attend PMAR this year? We’d love to hear your biggest takeaways. Reach out to us at hello@longspeakadvisory.com or drop us a note on LinkedIn!

SEC Clarifies Marketing Rule: Gross-of-Fee Returns Allowed Under Certain Conditions
The investment management industry has spent significant time grappling with the SEC’s Marketing Rule and the question of whether gross-of-fee returns can be presented without corresponding net-of-fee returns in certain cases. Many firms have invested resources in trying to allocate fees to individual securities and sectors in an effort to comply. However, the SEC has now issued two FAQs (March 19, 2025) that provide much appreciated clarity on extracted performance and portfolio characteristics. The key takeaway? It is possible to present gross-of-fee returns without net-of-fee returns—if certain conditions are met.
Extracted Performance: Gross Returns Can Stand Alone Under Specific Criteria
Investment advisers often present the performance of a single investment or a subset of a portfolio (“extracted performance”) in marketing materials. Historically, the SEC required both gross and net performance to be shown for such extracts. The new guidance provides a pathway for firms to display only gross-of-fee extracted performance, provided the following conditions are met:
- The extracted performance must be clearly identified as gross performance.
- The advertisement must also present the total portfolio’s gross and net performance in a manner consistent with SEC requirements.
- The total portfolio’s performance must be given at least equal prominence to, and facilitate comparison with, the extracted performance.
- The total portfolio’s performance must be calculated over a period that includes the entire period of the extracted performance.
If these conditions are satisfied, the SEC staff has indicated they will not recommend enforcement action, even if the extracted performance is presented without corresponding net returns. This is a notable shift, as it allows firms to avoid the complex and often impractical task of allocating fees at the investment or sector level.
Portfolio and Investment Characteristics: Net-of-Fee Not Always Required
Another common industry question has been whether certain portfolio or investment characteristics—such as yield, volatility, Sharpe ratio, sector returns, or attribution analysis—constitute “performance” under the marketing rule, and if so, whether they must be presented net of fees.
The SEC’s latest guidance acknowledges that calculating these characteristics net of fees can be difficult and, in some cases, may lead to misleading results. As a result, the staff has confirmed that firms may present gross characteristics alone, without net characteristics, if they meet the following criteria:
- The characteristic must be clearly identified as calculated without the deduction of fees and expenses.
- The advertisement must also present the total portfolio’s gross and net performance in a manner consistent with SEC requirements.
- The total portfolio’s performance must be given at least equal prominence to, and facilitate comparison with, the gross characteristic.
- The total portfolio’s performance must be calculated over a period that includes the entire period of the characteristic being presented.
As with extracted performance, these conditions help ensure that the presentation is not misleading, reducing the risk of enforcement action.
Bottom Line: A Practical Path Forward
This updated SEC guidance provides much-needed flexibility for investment managers, allowing for the presentation of gross-of-fee returns in a compliant manner. Firms that clearly disclose their approach and follow the specified conditions can reduce compliance burdens while still meeting investor protection standards. While this does not eliminate all complexities of the Marketing Rule, it does offer a practical solution that allows for more straightforward and meaningful performance reporting.
For firms navigating these changes, ensuring clear disclosures and maintaining compliance with the general prohibitions of the rule remains critical. Those who align their advertising materials with these guidelines can now confidently use gross-of-fee performance in a way that is both transparent and in compliance with regulatory requirements.
Questions?
If you have questions about calculating or presenting investment performance in a manner that complies with regulatory requirements or industry best practices, we would love to talk to you. Please feel free to email us at hello@longspeakadvisory.com.
