Wed, Feb 5, 2020

Ryan McNelley Spoke to Private Equity News on the Importance of Independent Valuations

Ryan McNelley, Managing Director in the Portfolio Valuation practice in London, has been quoted in an article in Private Equity News titled "Private equity comes under pressure for more transparency on marking of assets". 

In the piece, the issue of alternative investments firms coming under pressure to use independent third-party firms for their valuations is discussed. Ryan is quoted saying "At no point in my career in the past 15 years, has it been quite as acute of a risk as it is now in terms of valuations." 

He says, "Markets have been on a positive run since 2009. Generally as the markets have gone up, the risk of that from a valuation perspective in illiquid assets is that everyone becomes really complacent because no one is being hurt," McNelley adds. "When the market correction happens (it will) reveal deficiencies in the way people do things."

The article states that illiquid investments are extremely difficult to value, and that LPs should be aware of potential biases and conflicts of interests. On the notion of what could happen in the event of an investment losing value, Ryan says "the manager might be embarrassed and have personal reputational concerns and (may be) incentivized to not recognize it unless they have to". 

Subscribers of Private Equity News can read the full article here.

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