Valuation

The AIFM is required to ensure that for each AIF under management, appropriate and consistent procedures are in place to have an independent valuation of the assets. Whether the valuation function is performed by either the AIFM or by an external valuer, under the AIFMD the AIFM remains liable.
 
The key issues to consider in relation to valuation provisions under the AIFMD are:

Our services include:
  • Which entities are permitted to carry out the valuation function
  • The classification of and external valuation agent
  • The valuation procedures under the AIFMD
  • The liability provisions in relation to the valuation function
The valuation function may be carried out by the AIFM itself, or it may appoint an external valuation agent. Where the AIFM decides to carry out the valuation function itself, it must ensure that the process is functionally independent from the portfolio management and remuneration functions of the AIFM and that measures are put in place to mitigate conflicts of interest. Regulators have the power to require the AIFM to subject its valuation procedures and / or valuations to verification by an external valuation agent or auditor. Where an external valuation agent is appointed by the AIFM, the AIFMD provides that the external valuation agent is not permitted to sub-delegate the valuation function to a third party. In relation to the appointment, the AIFM must be able to demonstrate that the delegation is to an external valuation agent that is professionally recognised, can furnish professional guarantees, and is appointed pursuant to the delegation provisions of AIFMD. It is worth noting that what constitutes a “professional guarantee” is not defined under the AIFMD.
 
It is important to note that the valuation of assets and the calculation of the net asset value are two distinct activities. An administrator which carries out the calculation of the net asset value is not considered to be an external valuation agent as long as the entity does not provide valuations for individual assets but incorporates values which are obtained from other sources. This means that the fund administrator does not automatically assume the role of an external valuation agent and the AIFM (or other third party) may retain the valuation function, determine the fund’s pricing policy and delegate calculation of the net asset value in accordance with the pricing policy to the fund administrator.
 
We will assist in:
  • Defining the AIF’s valuation policy in collaboration with the investment adviser/manager
  • Engage and monitoring the external valuer (if applicable)
  • Work with fund administrator to ensure timely and correct release of NAV
  • Valuation Committee (if required)

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