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EisnerAmper’s CFO Roundtable: The Importance of Valuations from an Investor and Fund Perspective

IAM Limited LLC’s Eric Lazear and Alterna Capital’s Paul Schaffer weigh in on the importance of independence, consistency and communication amongst valuation policies and procedures

Valuation policies and procedures have improved over the last several years, following the 2008 global financial crisis. Therefore, managers must be able to demonstrate reasonable methods, consistency and solid communication, according to Eric Lazear, COO and CCO of IAM Limited and Paul Schaffer, CFO, Alterna Capital Partners. At EisnerAmper’s CFO Roundtable on  April 21, Lazear and Schaffer discussed the importance of best practices around a firm’s valuation policy from both an investor and manager perspective and how firms can be prepared to discuss them during their due diligence process with potential allocators/investors.

Reasonable valuation methods:
-Investors are increasingly concerned about the details of the valuations and the policies around the process during their due diligence activity.

Consistency:
- Funds should ensure they revisit their policy on a continual basis and consistently comply with their procedures. If a deviation is warranted, best practices for such event would be to ensure the situation is well documented.

Communication:
-Transparency goes a long way. The individual(s) responsible for valuing the fund’s assets would benefit from proactively communicating the processes and determinations throughout the year to their service providers, which can create an opportunity to address any issues earlier.

As a result of these enhanced valuation demands, making the due diligence process more complex for both investors and managers alike, allocators/investors can help managers better prepare by requesting ahead of the meeting things they would like to see with respect to their policies, while funds should also seek feedback from potential allocators/investors following their meeting.

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

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