July 9, 2024
Family offices hold more private assets than ever. The valuations behind them are often older than the reports suggest.
There is a quiet habit in private wealth reporting that almost everyone recognizes and almost no one talks about. A family office holds a stake in a private fund, a direct co-investment, maybe some real estate held through an LLC. Each quarter, the reporting pack goes out. The public securities are marked to the close. The private lines carry a number too, and it looks just as current as everything around it.
Often it is not. The number may come from a capital account statement that arrived months ago. It may have been carried forward from the previous quarter because the new K-1 had not landed yet. On the page, there is no way to tell the difference.
A records problem, not a valuation problem
Command Stone, a Boston company that builds reporting software for RIAs and family offices, has made this habit the center of its argument. Its view is that the debate over private marks is usually framed the wrong way. People argue about whether a valuation is right. The company argues the more basic question is whether the report tells you when that valuation was set.
The company’s own writing on why stale private marks should stay stale lays out how old figures come to look new. Spreadsheets often have no as-of column, so an old number sits next to fresh ones without any signal. When a late K-1 finally arrives, the previous value is overwritten, and the history of when each figure was true disappears. Sources are not kept alongside the numbers. And very often a single person owns the private book, which means updates stop whenever that person is out.
Command Stone describes the fix as closer to bookkeeping discipline than financial modeling. Enter the mark when the document arrives. Keep the old figure instead of overwriting it. Store the source next to the value. Print the date.
Stale, and labeled as stale
The company builds that discipline into its software. Its Private Holdings Ledger records each private valuation with the date attached, and the reporting will not interpolate a stale mark forward. If the most recent value is old, the report says it is old. The company’s phrasing is blunt: a private mark that gets rolled forward looks current, and it is not.
That sounds like a small design choice. For a family office, it changes what the quarterly pack actually communicates. A principal reading the report can see immediately which parts of the balance sheet reflect this quarter’s reality and which reflect a statement from earlier in the year. Nobody has to explain it after the fact, because the date was on the page the whole time.
Command Stone is also careful about what the flag is not. In the company’s words, a stale flag is not a score. It does not judge the investment or suggest a different number. It prints the as-of date next to the mark and leaves the interpretation to the people who own the relationship with the fund manager.
Why this matters more now
Private holdings have become a normal part of many wealthy families’ portfolios rather than an exotic sleeve. That shift raises the stakes of how they are reported. When private lines were a small share of total assets, a stale figure was a rounding issue. When they are a meaningful share, an undated mark can change how the whole household looks.
It also matters for oversight. Command Stone notes that the gap between a rolled-forward NAV and a dated mark is where many exam questions begin. A regulator or auditor who sees a private value will reasonably ask when it was set and what document supports it. A firm that has kept the date and the source can answer from the record. A firm that has been overwriting values each quarter has to reconstruct the history, if it can.
Honesty as a feature
There is something slightly counterintuitive about software whose selling point is admitting that some numbers are old. Most reporting tools compete on looking complete. Command Stone’s position is that a report that looks complete but hides its gaps is worse than one that shows them.
For families and the advisers who serve them, that is a reasonable trade. A dated private mark will never be as tidy as a fresh one. But it is true, and it tells you exactly how true it is. In a part of the portfolio where information arrives slowly and unevenly, that may be the most useful thing a report can do.
