Portfolio Company Valuation (ASC 820)
Portfolio valuations are a necessary step in running a fund, especially when there are limited partners involved. In our experience, there are benefits for everyone. US GAAP, for one, requires fair value measurement in financial reporting. Limited partners rely upon accurate estimates of value for their illiquid investments. And fund managers gain a third-party perspective on valuations that can assist them in allocation, risk assessment, and the monitoring of their holdings.
Under ASC 820, private equity funds, venture capital funds, hedge funds, pension funds, and other institutional investors are required to periodically report the values of their portfolio investments to their investors. Although many asset managers have the ability to perform this “mark to market” analysis themselves, many investors, funds, and regulators commonly prefer to use an independent valuation firm to prevent the appearance of a conflict of interest.
Redwood’s extensive experience with portfolio company valuations includes the valuations of preferred and common equity, convertible debt, options, and complex derivatives. At Redwood, we tailor our portfolio valuation solutions and provide independently concluded defensible values, so our clients have complete confidence in all of their reporting.