Wed, Oct 14, 2020

David Larsen Shares Views on Increasing Valuation Concerns

David Larsen, Managing Director in Duff & Phelps Alternative Asset Advisory practice, was recently quoted in a Private Equity Law Report article titled, “Independent Valuation Firms: As Scrutiny of Valuations Grows Throughout the Industry, so Does Their Importance.” 

The tenth anniversary of the Dodd-Frank Act in July 2020 was hardly cause for celebration among fund managers pondering how to calculate valuations in a summer marked by the coronavirus pandemic. Among its many reforms, the Dodd-Frank Act subjected PE sponsors to reporting requirements requiring valuations as registered investment advisers after removing a critical exemption under the Investment Advisers Act of 1940. That is not all, however, as pressure relating to valuations has grown for PE funds from all sides due to SEC scrutiny, increasing secondary market transactions, risks from sponsor-to-sponsor cross-trades and institutional investor investment allocation requirements. Most PE funds continue to produce valuations internally, but the use of independent valuation firms is slowly becoming more prevalent in the market in response to that pressure. This first article in a three-part series discusses why scrutiny of valuations by investors, auditors, GPs and regulatory agencies has increased of late, prompting greater use of independent valuation firms.

In this article, David shared his views on increasing concerns for limited partners (LPs), conflicts of interest, how LP concerns are driving attention from general partners (GPs) and valuation inconsistency with the stated methodology.

Read the full story here.

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Heightened regulatory concerns and vigilance, together with increased investor scrutiny, have led to increased demand for independent expert advice.