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LPs urged to ‘police fair value’

The International Private Equity and Venture Capital Valuation board has said GPs should be asked to comply with its mandate by investors. The committee chairman Herman Daems stressed the importance of transparency and fair comparison.

The International Private Equity and Venture Capital Valuation board (IPEV), yesterday said “investors will need to police” its guidelines on fair value.

Established in 2005 by France’s l’Association Française des Investisseurs en Capital, the British Venture Capital Association and the European Private Equity and Venture Capital Association, the guidelines advocate a consistent valuation process for private equity assets.

IPEV wants firms to have “workable” and “comparable” portfolio values worldwide, because this is not currently possible, Herman Daems, board chairman, said at a London press conference yesterday.

“We strongly believe that fair value is more than just applying a mechanical tool. You have to think in a broader sense which is why we need guidelines to advise decision making,” said Daems.

David Larsen, an IPEV board member, argued that limited partners should insist that fund managers comply before committing capital. Daems noted that LPs who demand this would gain greater transparency and a better way of comparing the worth of their assets.

The notion that the guidelines should serve as more of a “tool” than a “rule” was further endorsed by IPEV board member Anthony Cecil, head of assurance at KPMG. “I don’t think there can ever be a fair comparison between two funds as you always rely on judgement when interpreting guidelines,” he said.

IPEV is endorsed by 35 associations worldwide, and has recently gained five board representatives from North America.