CFGI’s Post

Navigating the intricate world of complex securities valuation can be daunting. From understanding fundamentals to mastering technical writing and ensuring smooth audit reviews, the challenges are many. Shout if you need valuation help! https://ow.ly/ByoI50SAK3j

A great discussion and wide range of perspectives on the remaining challenges, and with just under 200 days to go, still plenty of work to do for international brokers and asset managers to be ready. What is becoming clearer is the lack of knowing for sure if firms have done enough to manage the remaining exception volume in the shorter timeframes, in order to stay in control of the end of day processes. If not we'll see a large spike in fails and costs, as happened when the India market switched to T+1. Running a few scenario tests before we get to May seems a sensible action to pick up in early 2024.

According to this report from the FT, the FCA will launch a review of "private capital" valuations. As is often the case, there are echoes across the Atlantic: the SEC's long been concerned about stale valuations and the challenges inherent in valuations of illiquid assets (think of its recent action to mandate fairness/valuation opinions for GP-led secondaries). It's fair enough for regulators to expect managers to have a detailed approach to valuation, but some of the FCA's concern seems to stem from approaches to liquidity management (such as gates imposed recently when open-ended real estate funds became less liquid). But the recent brushes with illiquidity don't seem to have created the same spiral to the bottom that we saw in the Global Financial Crisis (at least partly because investor-level gates have become more prevalent and don't create the same incentives for a bank-run style stampede for the exits). But I hope the FCA and SEC can be open to the possibility that the tools we have in private capital have worked better this time around. And to the extent that private capital valuations face challenges, the regulators need to ask themselves whether more regulation will lead to better valuations, or whether the market simply needs to understand that private capital valuations will be subjective.

VRC's Paul Balynsky is quoted in a recent article from Private Funds CFO: Backtesting to satisfy SEC valuation rule A common method of testing the accuracy of a fund's valuation is backtesting - essentially comparing the price a security sold with what the fund adviser's fair valuation method came up with. >>> https://lnkd.in/gVwz9FTN #valuation #regulation #SEC

What do we have here? Time to maturity vs Yield to maturity I know quite a number of us are familiar with Yield To Maturity (YTM) in a Bond Indenture or Prospectus but what is Time to Maturity and are they similar? #Check this out! Time to maturing of a bond is the length/duration of time between the onset to the maturity of a bond Yield to maturity(YTM) is the return earned from an asset when it is held to maturity. #finance #learningandgrowing #financeinsights

The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk, or the general perils of investing, and expected return for assets, particularly stocks.1  It is a finance model that establishes a linear relationship between the required return on an investment and risk. The model is based on the relationship between an asset's beta, the risk-free rate (typically the Treasury bill rate), and the equity risk premium, or the expected return on the market minus the risk-free rate. CAPM evolved as a way to measure this systematic risk. It is widely used throughout finance for pricing risky securities and generating expected returns for assets, given the risk of those assets and cost of capital.

This week I had the opportunity to share growth insights with financial advisors in Los Angeles. The discussion covered a range of topics including portfolio hygiene, tax efficiency, risk management and fee budgeting. I also explained how BlackRock Model Portfolios and turnkey asset management platforms can help advisors improve their clients’ financial future. You can learn more about BlackRock’s Model Portfolio platform here -> https://lnkd.in/g_mFnZ-f #financialadvisors #assetmanagement

Are you Calculating beta in valuation the right way? #️⃣ Beta is an important element in calculating WACC through Capital Asset Pricing Model (CAPM) and hence due care should be taken while calculating it during valuation, especially while performing valuation using Discounted Cash Flow method of Income approach to valuation. #️⃣ Here is the quick insight, to evaluate you are calculating it right! If it adds value, Like, Comment and Repost! Follow (Mohit Bhatnagar, FMVA®) for more such insights. If you want to be notified for these insights, do 𝐬𝐮𝐛𝐬𝐜𝐫𝐢𝐛𝐞 to my 𝐧𝐞𝐰𝐬𝐥𝐞𝐭𝐭𝐞𝐫: 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐈𝐧𝐬𝐢𝐠𝐡𝐭𝐬 - https://lnkd.in/d3KXfmiq #Beta #ValuationInsights #finance #equityresearch #dcf #valuation

These core principles will help you tackle 99% of obstacles you face in managing Alternative Funds: 🥇 Fair treatment of investors Key point of reference for most decisions, processes, core principle to consider when in doubt Not only limited to transparency, but also fair treatment in comparison to other investors How decisions may affect the value of their investments Ethics and common sense are the main driver 🥈 Materiality Will there be a loss or potential loss of money? If so, who will pay? Banks, AIFMs, Depositaries, Administrators All have different degrees of liability when things go wrong Determining whether a complication or error you face has material consequences will have direct impact on urgency and remediation measures 👍 Remediation and immediate action We’re human and make mistakes What matters is good faith and reparation If faced with a NAV calculation error, a management letter after an audit Or discover you should improve a process Analyze the root cause/s, write a plan for improvement and implement it Document everything is writing Board resolutions and meetings go a long way (⚠️Remember that a board resolution must be signed by all directors/managers to be valid) 👍 Past decisions and consistency When in doubt check what has been done in similar situations for similar structures Ideally find a similar case pertaining to a Fund structure with the same legal entity type as that you are handling If you have a good network of peers, consult them too (lawyers, auditors, or myself at Adepa Global Services) And finally The last and most important: 🏆 Understand what you do. Understand it well. Keep asking Why until you can explain the situation to a 5 year old 😊 If you don’t understand the problem you will not find a solution #luxembourg #funds #AIFs

Following the 'Dear CEO' letter of March this year, the FCA has returned to the subject of PE valuations, reiterating the regulator's concerns in stark terms. DWF's dedicated Financial Services Regulatory and Investment Funds teams breakdown the significance of these signals for the private equity industry, which is now seen as a crucial component of the financial sector. Read more here; https://bit.ly/3KrkMoR #DWF #PrivateEquity #FCA