Will Ibbotson’s become obsolete in a matter of months?

BVWireIssue #57-4
June 27, 2007

“Public and private markets have no positive correlation,” said author, entrepreneur, and investment banker Rob Slee at last week’s IBA 2007 National Symposium (see next item, for more on this eye-opening, information-packed conference).  “If we’re grabbing data from one side to measure the other, we’re doing a disservice.  We have to clear this up,” he said, adding that it should be appraisers’ “main mission” to provide business owners with clear, comparable financial information by which to create long-term value and competitive advantage.

Slee is doing his part: He’s currently working with two academic institutions to develop “PCOC”—(pronounced “peacock”), a Private Cost of Capital model based on equity risk data from banks to private business owners.  “Goodbye Ibbotson’s, CAPM, and the build-up method,” he said.  In six to nine months, when PCOC is ready to launch, “we’ll have apples-to-apples” comparisons based on current return expectations of private financial markets. 

Will PCOC data be based on required or realized rates of return?  “Both,” said Slee, but admitted that while business owners and other data providers may know the former, they don’t always know the latter.  Slee’s website is quiet on the project (and he admitted that his academic partners, U. Miss. and Pepperdine, want to keep it that way, until PCOC is in the final stages).  But for those with more questions, Slee will be teaching a full-day course for the IBA in the fall, and will speak again at the AICPA’s National BV Conference in December.  

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