Valuation on the radar

Transcription

1 Valuation on the radar Challenges, opportunities and constraints in the light of rising regulations such as the AIFMD Private Equity

2 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 nowadays sourced from a multitude of guidelines, regulations and expectations on international and local scales. 2 Valuation on the radar

3 Investors expectations increase considerably 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. Investors The increased importance placed on Fair 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. IFRS and other GAAP - Fair Value Measurement Valuation under constraint Industry guidelines AIFMD Industry guidelines have tremendously evolved 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 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. Valuation on the radar 3

4 AIFMD adds an extra layer of questions and challenges to the agenda of Alternative Investment Managers Be ready to face the constraints of an AIFM Who can perform valuations under AIFMD? AIFM with functional independence requirements Qualified independent valuer Our solutions Valuation process implementation 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 Valuation process review Valuation policies and valuation modelling Insights into requirements necessary for compliance with the AIFMD Independent Valuation Services 4 Valuation on the radar

5 AIFMD adds an extra layer of questions and challenges to the agenda of Alternative Investment Managers 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 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 transparent valuation methods are applied to the alternative investment funds under management Our valuation specialists offer AIFM compliant valuation advise and external valuation services in all types of alternative assets Real Estate Private Equity Hybrid instruments Debt Instruments Distressed Debt Infrastructure Valuation on the radar 5

6 Contacts Olivier Coekelbergs Partner, Luxembourg Private Equity Leader Christophe Vandendorpe Directeur Associé, Luxembourg Valuation & Business Modelling Leader Kai Braun Partner, Luxembourg Alternatives Advisory Leader Edoardo Battista Ancora Market Facing Director, Valuation & Business Modelling Valuation on the radar

7 Valuation on the radar 7

8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization and/or one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young S.A. All Rights Reserved. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com/luxembourg ED none