Private equity valuation is always faced with the challenges arising out of opacity levels of the information available in the market, such as finding suitable guideline companies, and calibrating the relevant liquidity and marketability discounts. There are further signs of stringent scrutiny with IMF looking at asset management industry with alternatives included bringing private equity definitely under the preview of its concerns raised on the potential financial stability risks posed by the asset management industry. They are recommending that the oversight of the industry should be strengthened through the adoption of a âmicroprudential orientationâ. This has lead to increased reliance on observable market inputs for valuation of these alternative assets while the market itself may be illiquid or distressed. There is an increased stress on transparency of Private equity funds from both regulatory bodies and investors across the globe. The shift globally in fair value accounting and its increasing importance has forced alternative asset managers to revisit the traditional valuation approaches. Apart from the regulatory requirements accurate valuation of the portfolio holds utmost importance for private equity stake holders as it facilitates intelligent decision making process. Timely accurate valuation and adherence to the best practices provides relevant information to the LPâs to update their investment decisions and also attracts high quality investors for the private equity managers, who are pivotal to the business. A robust valuation process helps the Private equity funds which, continue playing more significant role in the market, and help minimize the risks to the macro economics too. Hence transparent precise valuation reporting in private equity becomes imperative given its cascading effects on growth and stability of the macroeconomic factors in the longer run.
Private equity valuation is always faced with the challenges arising out of opacity levels of the information available in the market, such as finding suitable guideline companies, and calibrating the relevant liquidity and marketability discounts. There are further signs of stringent scrutiny with IMF looking at asset management industry with alternatives included bringing private equity definitely under the preview of its concerns raised on the potential financial stability risks posed by the asset management industry. They are recommending that the oversight of the industry should be strengthened through the adoption of a âmicroprudential orientationâ. This has lead to increased reliance on observable market inputs for valuation of these alternative assets while the market itself may be illiquid or distressed. There is an increased stress on transparency of Private equity funds from both regulatory bodies and investors across the globe. The shift globally in fair value accounting and its increasing importance has forced alternative asset managers to revisit the traditional valuation approaches. Apart from the regulatory requirements accurate valuation of the portfolio holds utmost importance for private equity stake holders as it facilitates intelligent decision making process. Timely accurate valuation and adherence to the best practices provides relevant information to the LPâs to update their investment decisions and also attracts high quality investors for the private equity managers, who are pivotal to the business. A robust valuation process helps the Private equity funds which, continue playing more significant role in the market, and help minimize the risks to the macro economics too. Hence transparent precise valuation reporting in private equity becomes imperative given its cascading effects on growth and stability of the macroeconomic factors in the longer run.