Key Takeaways
- • The Manhattan US Attorney's Office is investigating valuation practices at BlackRock TCP Capital Corp (TCPC), a publicly traded business development company and private credit fund, with executives reportedly questioned as part of the inquiry.
- • TCPC disclosed a 19% portfolio value reduction in an unusual off-cycle update in January 2026, with net asset value falling from $8.71 to $7.07 per share in Q4, triggering multiple class-action lawsuits alleging misleading disclosures and improper loan asset valuation.
- • The probe reflects broader regulatory scrutiny of private credit valuation methodologies, with officials previously flagging concerns about potential "mis-marking" of illiquid investments across the industry.
- • Private credit funds rely heavily on internal valuation models due to the absence of active trading markets for underlying loans, making periodic portfolio "marks" critical drivers of reported performance, investor returns, and management fee calculations.
- • TCPC shares have experienced significant declines over the period, reflecting wider sector pressure as concerns mount regarding lending standards and borrower stress in the private credit market.
Summary
Federal prosecutors at the Manhattan US Attorney's Office for the Southern District of New York are conducting an investigation into valuation practices at BlackRock TCP Capital Corp (TCPC), according to Bloomberg reporting based on unnamed sources familiar with the matter. The inquiry has progressed to the stage of seeking information from the fund and questioning executives, though no charges have been filed and the scope of the investigation—whether it extends to broader valuation practices across the private credit industry—remains unclear.
The investigation occurs against the backdrop of significant portfolio deterioration at TCPC. In January 2026, the fund disclosed an unusual off-cycle update warning of an approximately 19% reduction in portfolio value. This announcement precipitated a sharp decline in share price and prompted multiple class-action lawsuits from investors alleging misleading disclosures and improper valuation of loan assets. The fund subsequently reported a fourth-quarter net asset value of $7.07 per share, down substantially from $8.71 in the prior period, reflecting the magnitude of the revaluation event.
The regulatory scrutiny underscores longstanding concerns within the financial regulatory community regarding valuation methodologies in private credit. Because loans held by funds such as TCPC lack active trading markets, portfolio managers depend on internal valuation models to determine periodic "marks"—assessments that directly influence reported performance metrics, investor returns, and fee generation. This reliance on proprietary models has drawn official attention around the potential for "mis-marking" of illiquid investments, a vulnerability amplified by current sector headwinds. TCPC shares have declined substantially over the period as broader concerns about lending standards and borrower stress continue to weigh on private credit valuations.
BlackRock declined to comment on the investigation, and the US Attorney's Office did not respond to requests for comment, leaving critical details regarding the investigation's scope and specific concerns unresolved at this stage.
The investigation occurs against the backdrop of significant portfolio deterioration at TCPC. In January 2026, the fund disclosed an unusual off-cycle update warning of an approximately 19% reduction in portfolio value. This announcement precipitated a sharp decline in share price and prompted multiple class-action lawsuits from investors alleging misleading disclosures and improper valuation of loan assets. The fund subsequently reported a fourth-quarter net asset value of $7.07 per share, down substantially from $8.71 in the prior period, reflecting the magnitude of the revaluation event.
The regulatory scrutiny underscores longstanding concerns within the financial regulatory community regarding valuation methodologies in private credit. Because loans held by funds such as TCPC lack active trading markets, portfolio managers depend on internal valuation models to determine periodic "marks"—assessments that directly influence reported performance metrics, investor returns, and fee generation. This reliance on proprietary models has drawn official attention around the potential for "mis-marking" of illiquid investments, a vulnerability amplified by current sector headwinds. TCPC shares have declined substantially over the period as broader concerns about lending standards and borrower stress continue to weigh on private credit valuations.
BlackRock declined to comment on the investigation, and the US Attorney's Office did not respond to requests for comment, leaving critical details regarding the investigation's scope and specific concerns unresolved at this stage.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.