Growing Role for Lincoln as External Valuer under AIFMD in the Eurozone

As a response to the last global financial crisis 2008/2009, many governing bodies around the globe saw a growing interest in the need for greater regulation that allowed for more transparency for market participants and investor protection. The Alternative Investments Fund Managers Directive (“AIFMD”) was adopted by the European Council and Parliament in 2011. The final text was published in the EU’s Official Journal on 1 July 2011 and came into force on 21 July 2011.

Lincoln External Valuer AIFMD Oct 2016

 

Overall the AIFMD is broad in scope and covers managers of all varieties of collective investment undertakings, ranging from securities funds to funds investing in illiquid assets. It covers all possible investment strategies and disregards the legal form or structure of the collective investment undertaking, whether open-ended or closed-ended, or whether formed under contract or statue.

With regards to valuations, the Alternative Investments Fund Managers Directive (“AIFMD”) requires that an Alternative Investment Fund Manager (“AIFM”) must establish and maintain appropriate and consistent procedures concerning the independent and proper valuation of assets belonging to Alternative Investment Funds (“AIF”). In particular, the AIFMD outlines who, how and when valuations of the assets managed by an AIFM are required and who assumes responsibility. The valuation function may be performed either by:

  • The authorised AIFM itself, provided that, among others, the valuation is carried out independent from the portfolio management function; or
  • An External Valuer which is independent from the AIFM. The External Valuer must be able to demonstrate mandatory professional registration and sufficient professional guarantees to value assets independently and in accordance with AIFMD guidance.

If the AIFM elects to carry out the valuation itself, the regulatory body may require a valuation procedure and valuation verification / support role by a 3rd party valuer. From our experience, nearly all AIFMD related valuation mandates in Europe have been in a support role function to the AIFM which leaves the AIFM with ultimate control over the value of the security position. However, there has been a growing trend for AIFMs to appoint External Valuers.

For more information about Valuations under AIFMD, please click here.

About Lincoln International

Lincoln International specializes in merger and acquisition advisory services, debt advisory services, private capital raising and restructuring advice on mid-market transactions. Lincoln International also provides fairness opinions, valuations and joint venture and partnering advisory services on a wide range of transaction sizes. With seventeen offices in the Americas, Asia and Europe, Lincoln International has strong local knowledge and contacts in key global economies. The firm provides clients with senior-level attention, in-depth industry expertise and integrated resources. By being focused and independent, Lincoln International serves its clients without conflicts of interest. More information about Lincoln International can be obtained at www.lincolninternational.com