No doubt they are valuing their investments at fair value as...

No doubt they are valuing their investments at fair value as required by the accounting standards. The issue with illiquid assets with no ready market is that there is a very wide range of valuations that can be justified for each asset. Being an investment manager, I know that I could justify pretty much any reasonable valuation to an auditor depending on whether I want to be conservative or aggressive. There is always a "discussion" between the auditor and the manager around the valuations but if you're persuasive enough you can usually always convince them.

In our case, the investment manager is private and we receive our performance fees based upon the actual cash received by our investors upon exit of that investment, so we have no real incentive one way or the other to mark up our investments' holding value before they are exited.

However, when the manager is listed and there is pressure to show profit growth and accrued (but not yet paid) performance fees feed directly into the P&L, the incentives are pretty strong to be aggressive on the valuations.

Personally I think the accounting standards change is entirely appropriate because it is potentially quite misleading for performance fees that would be paid in several years (if at all depending on the ultimate performance of the investment) to be included in the current year's P&L.