Business Valuation Resources and Pension Governance, LLC just completed a joint survey on BV firms currently providing valuation services to hedge fund clients—and it appears that relatively few hedge funds are reaching out to the BV profession, despite regulatory and legal pressure to do so. Some highlights are summarized below:
- Only 28% of appraisers with hedge fund clients are registered with the SEC.
- Appraisers with hedge fund (defined as funds of funds for the sake of this survey) clients say that 55% of the funds have a formal valuation process in place.
- Almost half the hedge funds generate valuation numbers internally, and a quarter rely on third party administrators. Relatively few used certified business appraisers.
- Many reasons were given as to why hedge funds procure a valuation. These include, but are not limited to: auditing (33% of respondents), asset allocation (27%) and performance reporting (24%), redemption (18%) and risk management (18%).
- Eight out of 10 appraisers with hedge fund clients say they’ve never been called in to assist their hedge fund clients with the development of a valuation policy.
- When asked about standards (guidelines), 48% of respondents cite fair value accounting rules, 23% of respondents say they use no standards and 23% of survey-takers cite the Private Equity Industry Group Guidelines (PEIGG).
- For those who choose not to pursue this area, appraiser liability was cited as the primary deterrent (77% of respondents), followed by 54% of survey-takers who say they are unfamiliar with the hedge fund industry.
Susan Mangiero will offer more analysis of the survey results in an upcoming issue of the Business Valuation Update™.
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