Markit launches private equity valuations service
Financial information services company Markit has launched a service for investors to value their assets held by private equity funds. It comes in anticipation of Europe’s Alternative Investment Fund Managers Directive (AIFMD), which requires alternative asset managers to value fund assets independently.
The service, called Markit Portfolio Valuation - Private Equity, provides valuations for equity investments in growth and buy-out stage companies. It is designed to satisfy the statutory and policy requirements of investors, regulators and business managers for independent calculation of prices for input into net asset valuations and other key portfolio metrics.
"Markit's private equity valuations service uses a market approach and adjusts for points of difference between the portfolio company and our proprietary database of public peer company factor data," said Kevin O'Connor, director at Markit Portfolio Valuations. "Valuations are standardized and therefore comparable over time and between firms to aid investment decision-making and reporting."
Its valuations are based on the performance ratios of over 30,000 public companies. These ratios, which include EBITDA, sales, net assets, gross assets and a discounted cash flow proxy, are adjusted based on the over- or underperformance of the portfolio company relative to its peers, and used to calculate estimated enterprise values.
A sector-specific weighting is then placed on each estimate and the weighted estimates are combined to provide the portfolio company's valuation.
AIFMD, which came into effect this month, requires real estate, infrastructure and hedge fund as well as private equity fund managers to comply with the directive's requirements on transparency, capital adequacy, remuneration and delegation restrictions, risk and valuations, if they want to market their funds within the EU.
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