Utilising the expertise and experience of seasoned, dedicated valuation practitioners can substantially enhance the valuation function of investment funds, with a myriad of benefits.
Certainty of independance Questions around independence regularly arise from auditors and investors where significant parts of a fund’s valuation function are managed internally. Oversight of the valuation process and the reporting of carrying values are the ultimate responsibility of the fund manager, but transitioning core parts of the valuation function to external valuation providers will often lead to greater certainty and perception of independence. However, independence remains a key consideration even when external valuation advisers are involved. Retaining the same external provider for extended periods of time can run the risk of diminishing the degree of independence, where increasing ‘familiarity’ with an investment may lead to a gradual reduction in the extent of ongoing challenge around the selection of methodologies and subjective assumptions.
Navigating complexity
Valuing illiquid assets during a volatile market is significantly more complex than during a stable market as pricing metrics and benchmarks are highly volatile and recovery pathways so varied. All valuation approaches are impacted, and significant care must be taken when applying methodologies, conducting analysis, and interpreting results. In a climate that requires a greater appreciation of both the technical and commercial aspects of valuation, the support of dedicated valuation experts can help ensure robust processes and appropriate outcomes. Reduced burden Transitioning workload to advisers with a day-to-day focus on both valuation accuracy and process efficiency reduces the time commitment of internal resources, whilst ensuring that the valuation function is supported by appropriately qualified experts. Time consuming processes such as information gathering, research, benchmarking, valuation analysis, critical thinking, cross-checking, drawing conclusions, documentation, review and reporting can be conducted efficiently by dedicated valuers, whilst the burden of audit review processes can be largely transferred to advisers well versed in liaising with auditors, and having their work reviewed.
Genuine best practice
Dedicated valuation practitioners that are active in providing independent valuations throughout the deal cycle, across industries, and in a variety of contexts, can bring considerable insight and experience to the valuation process. Being active in the market allows technical expertise and commercial reasoning – both of which are critical to robust valuation – to evolve in line with market developments and valuation best practice.
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