For private equity fund sponsors, reasonable, defensible, and timely fair value marks for portfolio investments are increasingly demanded by existing and prospective investors, auditors, and regulators. In this, our inaugural issue of Portfolio Valuation, we will provide a brief digest and commentary of some of the most relevant market trends influencing the fair value regarding private equity portfolio investments.
Excerpting from the discussion:
Valuation is likely to get trickier in 2015. As noted in the chart, private equity investors have been taking advantage of favorable exit markets, with portfolio dispositions exceeding portfolio acquisitions for the fourth consecutive year in 2014. A steady deal flow at generally attractive multiples provides fund managers with a good contemporaneous set of comparable transactions for determining fair value. In contrast, measuring fair value is much more difficult in less liquid market environments, such as were endured in 2008 and 2009.
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