deloitte valuation conference · pdf file• make decisions on valuation issues following...

24th February 2015

Deloitte Valuation ConferenceAIFMD valuation topics for asset servicers

Introduction 3

Focus on Roles and responsibilities of the Fund Administrator and Depositary 6

Case studies 9

Panel 13

Q&A and wrap-up 15

Agenda

2© 2015 Deloitte Tax & Consulting

Valuation for alternative investment funds (AIF)Overview of key stakeholders and related responsibilities

© 2015 Deloitte Tax & Consulting 3

Main scope for today

Responsibilities:• Day-to-day NAV calculation and trigger

escalation process• Ensure valuation models and policies

are appropriate• Act as external valuer if appointed

by the AIFM*

Responsibilities:• Perform oversight on NAV calculation

and be involved in escalation of NAV issues

• Ensure valuation of AIF assets is independent and appropriate for each AIF

• Understand valuation models and risk management framework

* If CA is appointed as External Valuer, roles and responsibilities are more important

BoD

Valuation: multiple actors with multiple responsibilitiesWhat are the main questions we will treat today?

Responsible for NAV calculation and portfolio valuation of funds

Audit of financial statements

NAV calculation process review

Valuation oversight

Appoint

• Due diligence, how far must everyone go?

• External Valuer, is it a permanent stakeholder?

• How far do providers need to go in the review of valuation models?

• Do services participate to the Valuation Committee?

• NAV oversight by the Depositary Bank

• Investor disclosure

• Escalation process

Delegation

Delegation

Appoint

Portfolio ManagersDelegation


Potential synergies

AIFM

Funds

BoD

Conducting Officers

Valuation Committee

CentralAdministrator

IndependentValuer

Depositary

Auditor

Introduction 3

Focus on roles and responsibilities of the Fund Administrator and Depositary 6

Case studies 9

Panel 13

Q&A and wrap-up 15

Agenda


Roles and responsibilities of all actors in the valuation value chain


• Ultimately responsible for valuation

• Understand and approve model and policy for each share class

• Make decisions on valuation issuesfollowing escalation process

• Perform due diligence on models and delegates

• Ensure escalation process is in place

• Make decisions based on escalation

• Liaise with Auditors and valuation delegates

• Oversight on Fund Administration delegate

• Review valuation model and policy appropriateness vs AIF risk profile

• May not be involved in Portfolio Management

• Ensure DB can perform oversight vs risk profile of the fund (information flow)

• Be involved in the escalation process and intervention

• Ensure NAV process is appropriate

• Set-up valuation policy and models per asset class (inc. regular update)

• Perform valuation*• On-going review of

models & policy

• Oversight of valuation expert appointed (where applicable)

• Trigger and initiate escalation process

• Provide Data/price for NAV Calculation

• Set-up valuation policy and models per asset class (inc. regular update)

• Perform valuation*• On- going review of

models & policy

• Oversight of valuation expert appointed (where applicable)

• Trigger and initiate escalation process

• Provide Data/price for NAV Calculation

• Ensure policy and procedure is independent and appropriate

• N/A • Ensure valuation is independent and appropriate

• Ensure escalation process is appropriate

• Be involved in the escalation process

• Perform oversight on NAV Calculation

• Be involved in NAV escalation process

• Only if appointed as external valuer


• Review valuationmodels and policies


• Day-to-day NAV calculation

• Trigger escalation process in case of NAV issues

Define and implementvaluation model and

policy

Perform valuationfunction

Oversight of valuation delegates

and models

Escalation and intervention on

valuation issuesNAV Calculation

Board Directors, conducting officers and/or Valuation committee

Risk Manager

Internal Valuer

External Valuer

Depository

Central Administration**

Main scope for today

ILLUSTRATIVE

* If an external valuation expert is appointed, review of the valuation** If CA is appointed as External Valuer, roles and responsibilities are more important

Market practices addressing the regulatory obligations

Source: Deloitte Analysis7

NAV calculation

The level of requirements can vary depending on the following aspects:

© 2015 Deloitte Tax & Consulting

• Risk profile and valuation lifecycle of the fund

• Risk appetite of the actors

• Operational set-up (integrated vs non-integrated)• Asset classes (PE, RE, HF, Marked to Model)

Perform Depositary due diligence

Valuation Delegates due diligence

Tripartite operating memorandums

Perform AIFM due diligence

Review of valuation policies

Risk based approach oversight on NAV

Be involved in escalation process

Valuation policies Oversight

Trigger escalation process

Review models and policies

Second level review on valuations

Review models and policies

Introduction 3


Case studies 9

Panel 13

Q&A and wrap-up 15

Agenda


BoD

Case studies (1/3)Fund of Hedge Funds*

NAV process review

Portfolio Managers


AIFM

Fund of HedgeFunds

BoD

Conducting Officers

Valuation Committee


External provider

Depositary

Auditor

HedgeFund 1

HedgeFund 1

HedgeFund 1

Portfolio 1

Portfolio 2

Portfolio 3

NAV Calculation

Target Funds’ NAV

Valuation oversight

• Compare estimated NAV’s to final NAV of HF’s

• Collect target fund financial statements (FS)

• Review and analyse target fund FS

Valuation risk report

*Fund valuation delegated to central administratorSource: Deloitte analysis

• Accounting / Consolidation• Book values (GAAP)• Accounts completeness / validity

• NAV calculation (INREV) • Fund reporting / discl.• Reliance on third parties

Case studies (2/3)Real Estate Fund

Portfolio Managers

AIFM

RE Funds(closed-ended)

BoD

Conducting Officers

Valuation Function

Depositary

Fund holding SPV

PropCo 1

PropCo 2

PropCo 3

Real estate Appraiser

Source: Deloitte analysis

Properties values



Accounting Agent

• Understand the set-up• Risks identified and mitigated?• Procedures applied / up-to-date?• Structure monitoring (ownership,

cash, etc.)

Investments values


Case studies (3/3)Mark to model*

Counterparty prices within defined tolerance

Portfolio Managers

AIFM

Funds

BoD

Conducting Officers

Valuation Committee


External provider

Depositary

Pricing comparison

NAV Calculation

Valuation oversight

Portfolio primarily composed of OTC

derivatives

Escalation process

Analysis of differences with vendors and counterparties

Fund’s NAV Calculation

OTCCounterparty

Internally developed valuation model

External valuation model

Valuation model due-diligence

Model vendor

Derivatives valuation

Valuation control

Delegation

*Fund valuation delegated to central administrator

Market D

ata Provider

AND/OR

AND/OR

External Provider

AND/OR

Source: Deloitte analysis

Introduction 3


Case studies 9

Panel 13

Q&A and wrap-up 15

Agenda



Our panellists Arnaud BonPrivate Equity & Real Estate Leader SGG Group

Arnaud joined SGG in 2009 as Operational Leader of the Fund Servicing department. Today, he is the firm’s Private Equity & Real Estate Industry Leader.

As a Paris bar registered lawyer, he previously worked for Allen & Overy as a lawyer for Alternative Investment clients. Arnaud has advised on innovative alternative fund structuring and organizational models for leading fund managers.

He has a Master’s degree II in Business and Financial Law and Magistère of Business Law from Sorbonne University (Paris).

Born in France, Arnaud is a native French speaker, as well as fluent in English; he is also proficient in Greek.

Pierre-Antoine BoulatManaging DirectorFunction: Chief Executive Officer UBS Fund Services (Luxembourg) S.A. and Head Asset Servicing Delivery at UBS in Luxembourg

Pierre-Antoine Boulat joined UBS Global Asset Management as Head of the Operations and IT Global Program Office in October 2006.

He was appointed Head of Fund Services in Luxembourg in September 2011, responsible for the successful development of Global AM’s internal and third-party full value chain (from Management Company Services to Fund Administration and Transfer Agency) offering to institutional and quasi-institutional (Wealth, Family Offices, Financial Intermediaries, Asset Managers, Banks) client franchise in the market as well as the availability of a commercial, profitable and high quality capability offering.

From May 2012, in the context of the Integrated Bank in Luxembourg, Pierre-Antoine took up additional role in Asset Servicing Europe, and is today Head of Asset Servicing Delivery in charge of client relationship management and client service.

Nico Thill Directeur and Head of Investment Fund Services Banque de Luxembourg

Nico Thill, born in 1968, has over 20 years experience in the Luxembourg’s investment funds industry. He is currently member of the management of Banque de Luxembourg where he heads the Investment Fund Services’ business. Nico Thill holds a degree in Business Administration from the University of Liège and a degree in Commercial Engineering from the Hautes Etudes Commerciales in Liège, Belgium.

Yvan de LaurentisHead of Depositary and Fiduciary Services

Born in Marseille, France in 1974, Yvan graduated in Economics from the Ecole Supérieure de Commerce de Marseille-Provence in 1997.

Since October 2004 Yvan has been heading and actively supporting the developement of BNP Paribas Securities Services Luxembourg’s Depositary and Fiduciary Services departement. In that role he is in charge notably of the fund depositary supervision, the fund hosting solution, the monitoring of funds investment rules and the legal fund engineering department.

He is also an active of Member of ALFI and various committees and working groups including the Luxembourg DepoBank Forum and HR & Training Committee.

Introduction 3


Case studies 9

Panel 13

Q&A and wrap-up 15

Agenda


Q&A



Key contacts

Pierre MassetPartner – Corporate Finance Leader+ 352 451 452 [email protected]

Strategy & Corporate FinanceSimon Ramos Partner – Investment Management+ 352 451 452 [email protected]

Strategy & Corporate Finance

Thank youIf you have any questions or comments, please contact [email protected]

mailto:[email protected]

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