The Institutional Limited Partners Association announced today an official endorsement of valuation guidelines developed by the Private Equity Industry Guidelines Group (PEIGG).
The endorsement may add pressure to general partners to voluntarily comply with the guidelines.
In a statement, the board of directors of ILPA said that after a “thorough, two year consultative process” the trade group for major investors in private equity funds had decided to come out with an endorsement of the guidelines.
PEIGG is a volunteer group of private equity industry participants with the goal of creating a set of standard practices within the market.
Earlier this year, America’s National Venture Capital Association issued somewhat more lukewarm guidance on the PEIGG guidelines to NVCA members, calling for them to “consider” using the valuation standards.
At the root of the debate over PEIGG’s valuation standards is Paragraph 30 of the guidelines, which allows private investments to be prudently written up in value without an associated new round of financing. Critics argue that allowance may lead to arbitrary valuations in portfolios. The PEIGG subsequently issued a detailed clarification of Paragraph 30 that stressed GP judgment with valuation changes, as well as consultations with a fund valuations committee.
ILPA membership is comprised of more than 130 public and corporate pension plans, endowments, foundations, insurance companies and other institutional investors in private equity. The group claims to manage an aggregate of roughly $300 billion (€245 billion) in capital commitments.