Fair-Value Mark
Definition
A fair-value mark is the accounting estimate of an asset's exit price in an orderly transaction between market participants at the measurement date. For illiquid private credit and OREO, it is often based on appraisals, discounted cash flow, broker indications, or recovery scenarios rather than a live market quote.
Why it matters
Marks determine reported NAV, balance-sheet value, loss recognition, and sometimes covenant compliance. In stressed credit, a delayed or optimistic mark can make a portfolio look healthier than its actual exit value. Conservative fair-value marks help investors see losses sooner.
Common misconceptions
- •Fair value is not the same as par value.
- •Fair value is not guaranteed sale proceeds.
- •Two reasonable appraisers can produce different values for the same illiquid asset.
Technical details
Inputs investors should check
Recency of appraisals or broker opinions.
Discounts for forced sale, legal costs, property condition, and sale timeline.
Whether the mark changed after a default, foreclosure, or failed sale process.