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Valuation on the radarChallenges, opportunities and constraints in the light of rising regulations such as the AIFMD
Private Equity
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Valuations in the light of rising challenges
In the aftermath of the financial crisis,valuation of alternative assets has become a topic of utmost importance for regulators and many other stakeholders.
Valuation requirements are nowadayssourced from a multitude of guidelines, regulations and expectations on international and local scales.
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Investors’ expectations increaseconsiderably in terms of valuation transparency, frequency and independence. There is a stronger interest to have additional comfort on the figures. Additionally, private equity investors benefiting from the services of several asset managers encounter good governance challenges in relation to investment valuations. Such challenges include ensuring consistency in valuation approaches applied throughout their portfolio, and meeting their overall qualitative valuation standards.
IFRS and other GAAP - Fair Value MeasurementInvestors
AIFMDIndustry guidelines
Valuation under constraint
The increased importance placed onFair Value by international accounting authorities such as the IAS Board brings supplementary challenges. IFRS 13 - Fair Value is a good illustrative example. The standards and the related imposed disclosures seek to increase consistency and comparability in fair value reassessments and related disclosures.
AIFMD represents a holistic approach to valuation that sets the minimum standards for organizational and independence conditions around alternative asset valuation. A close application of the AIFMD leads to efficiency gains in the interaction of all aforementioned constraints.
Industry guidelines have tremendouslyevolved over the past years and are expected to continue to do so to continuously adapt to regulatory changes, accounting amendments, investor expectation and to best promote best practices.The regular updates of IPEV guidelines within the private equity sector is clearly illustrating the above.
AIFMD adds an extra layer of questions and challenges to the agenda of Alternative Investment Managers
Who can perform valuations under AIFMD?
• AIFM with functional independence requirements
• Qualified independent valuer
Our solutions
Valuation process implementation
Valuation process review
Valuation policies and valuation modelling
Insights into requirements necessary for compliance with the AIFMD
Independent Valuation Services
Which valuation method to choose?
In respect to the valuation model in use,policies and procedures need to point out:• The models, main features and limitations
(explanation and justification)• The input (underlying data and
assumptions)• The selection criteria for pricing and
market data sourcing• The assessment of the available relevant
methodologies, sensitivity to changes• The selection process of a valuation
approach, the validation process by a person with sufficient knowledge in model building
• The multi-approach valuation methodology backed up and reconciled with corroborating valuation approaches
Be ready to face the constraints of an AIFM
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Our value added
• Biggest integrated Valuation and Business Modelling (VBM) network in the world (more than 3,400 professionals)
• Dedicated valuation team of 20 professionals in Luxembourg• Leader in alternative funds industry (Private Equity, Real Estate, Hedge
Funds) in Luxembourg• Transparent and competitive pricing• Technology and access to databases in place• Independence• Experience and expertise in IFRS and other GAAP• At the forefront of latest industry developments
• Our valuation specialists offer AIFM compliant valuation advise and external valuation services in all types of alternative assets
Real Estate
Debt Instruments
Private Equity
Distressed Debt
Hybrid instruments
Infrastructure
What are the requirements regarding the valuation procedures to put in place under AIFMD?
AIFMs must
• Establish, maintain, implement and review written policies and procedures for each AIF they manage
• Ensure that fair, appropriate and trans- parent valuation methods are applied to the alternative investment funds under management
AIFMD adds an extra layer of questions and challenges to the agenda of Alternative Investment Managers
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Olivier CoekelbergsPartner, Luxembourg Private Equity Leader+352 42 124 [email protected]
Kai BraunPartner, Luxembourg Alternatives Advisory Leader+352 42 124 [email protected]
Christophe VandendorpeDirecteur Associé, Luxembourg Valuation & Business Modelling Leader+352 42 124 [email protected]
Edoardo Battista AncoraMarket Facing Director, Valuation & Business Modelling+352 42 124 [email protected]
Contacts
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