The International Private Equity & Venture Capital Valuation Guidelines Board (“the IPEV Board”) today provides special guidance with respect to applying the IPEV Valuation Guidelines when estimating fair value at 31 March 2020.
As a board, our concern is first and foremost for those individuals impacted by the global COVID-19 pandemic, physically, emotionally and economically.
The alternative asset industry is strong and robust. Yet this crisis is different from crises in 2001/2 and 2008/9. The current crisis has impacted more people, more businesses, more rapidly than any crisis in recent history. During this unique and critical time, alternative asset managers are focused on three primary areas of concern:
1. The wellbeing of their employees and the employees of their investee portfolio companies.
2. Helping their investee companies weather the economic storm being faced globally.
3. Providing their investors with timely, useful information as to the performance and financial condition of underlying investments.
Without diminishing the critical importance of items 1 and 2, the board provides its perspective on item 3. The alternative asset industry is larger and more sophisticated than in previous crises. Limited Partners (LPs) need to know the fair value of their limited partnership interests to make asset allocations, to allow beneficiaries to make investment decisions, to exercise their fiduciary duty and for their own financial reporting requirements. Therefore, LPs have a critical need at 31 March 2020 for their fund managers (GPs) to report underlying investments at fair value on a timely, consistent and rigorously determined basis.
During the 2008 crisis the board stated that “fair value [is] the best measure of valuing private equity portfolio companies and investments in private equity funds.” We reaffirm this statement today. Fair value continues to provide investors in funds with the most consistent and comparable decision useful information. The fair value judgements undertaken at 31 March 2020 will be very challenging. Applying the IPEV Valuation Guidelines with rigor and staying true to the principles of fair value will allow managers and valuers to rise to the challenge and extend the track record of providing investors with useful transparent information.
The special valuation guidance is available here.
Notes to editors
1. The IPEV Board and Valuation Guidelines
The mission of the IPEV Board is to provide high quality, uniform, globally acceptable, best practice guidance for private capital valuation purposes.
The IPEV Board was created as an independent body in 2005 and is responsible for maintaining, promoting, monitoring and updating the IPEV Valuation Guidelines. The Board has an advisory role and gives guidance on the application of the Guidelines to all stakeholders in the private equity and venture capital industry including practitioners, investors, regulators and auditors. More information about the IPEV Board can be found here.
2. IPEV Valuation Guidelines – Special guidance, 31 March 2020
The special valuation guidance for valuations prepared as at 31 March 2020 is available here.
3. Contact details
For further information, please email [email protected].