Valuation for AIFM Heads/Conducting Officers/Board

Alternative asset classes (Private Equity, Private debt, Venture Capital, Infrastructure and Real Estate) have grown significantly over the past years and are expected to continue to grow as institutional (and individual) investors seek ways to diversify their portfolio holdings with various return and risk profiles.

In the context of unprecedented market conditions and a challenging global economy, fair valuation of alternative investments/assets, including strength and reliability of the valuation process, is an ever-increasing area of focus for investors, fund managers, accounting standards setting bodies, auditors, and regulators.

This Alternatives Valuation curriculum has been developed with PwC’s Academy to help participants understand the challenges associated with fair valuation assessment of alternative investments/assets.

Alternative assets valuation - Introduction (1h)

This module will help you to develop a foundational knowledge on valuation concepts, methodologies and techniques used to value the alternative asset classes (Private Equity, Private debt, Venture capital, Infrastructure and Real estate).

The module will cover the following topics:

• Valuation concepts for alternative products;
• Valuation guidelines and framework (IPEV guidelines, international valuation standards, Red Book); and
• Valuation methodologies (market approach, income approach, net assets approach).

Alternative assets valuation function & valuation process - Regulatory aspects (2h)

Market turbulence, credit crisis, and pressure from governing bodies for additional regulation in the alternative investments sector are some important elements which we believe will put an increasing emphasis on the requirement to have a strong and reliable fair valuation process for alternative assets. Going forward, general partners can expect investors, auditors, and regulators to scrutinise their valuation estimation more closely.

This module will help you to understand the key roles and responsibilities of the valuation function, as well as the controls and requirements in regards with the regulatory framework.

The module will cover the following topics:

• Valuation function of an AIFM: operating models, roles, and responsibilities;
• Overview of the valuation process;
• Valuation policy;
• Valuation assessments;
• Valuation committees and governance; and
• Hot topics.

Alternative assets valuation and valuation oversight: Private Equity (3h)

Private equity as an asset class has raised significant interest from institutional and individual investors over the past year. Private equity funds are often seen as a resourceful way of funding companies of various sizes and nature, with an attractive expected risk-adjusted return.

Prices, implied in a theoretical transaction, are not directly - if not at all - observable, as private equity investments are not quoted by nature, which makes the fair valuation assessment an inherent challenge.

Fair valuation of private equity investments, including strength and reliability of the valuation process, is an ever-increasing area of focus for investors, accounting standards setting bodies, auditors, and regulators in the context of unprecedented market conditions and a challenging global economy.

This module will help you to get a comprehensive understanding on the valuation concepts and recognised methodologies specific to the Private Equity assets.

The module will cover the following topics:

• Key concepts in business valuations;
• Recognised valuation methodologies;
• Quote price in the context of a private equity/venture capital asset valuations;
• Market multiples;
• Transaction multiples;
• Discounted cash flows;
• Price of recent investment as an input in the calibration exercise; and
• A series of practical examples to apply the concepts covered in the training.

Alternative assets valuation and valuation oversight: Debt Funds (2h)

Private debt has grown significantly over the past few years as companies have contemplated debt as an alternative way to raise money from traditional equity and as they continue to shift away from traditional bank-backed financing.

At the same time private debt as an asset class continue to act as a strong diversifier in portfolios institutional investors, and a source of return - in a low interest rate environment - with the corresponding overall lower risk profile compared to other alternative products, such as private equity or venture capital.

Private debt actors have explored and deployed various strategies, taking advantage of the current market environment and opportunities, and made use of a wide range of debt instruments with simplistic to extremely complex features.

This diversity of instruments and corresponding features implies extra and specific diligence when conducting a fair valuation assessment of debt instruments.

This module will help you get a comprehensive knowledge on valuation concepts specific to debt instruments, recognised methodologies as well as apply these methodologies in the context of fair valuation assessment.

The module will cover the following topics:

• Key terms and features of debt instruments;
• Conceptual framework to perform the valuation assessment of debt instruments;
• Recoverability analysis;
• Discounted cash flows analysis;
• Calibration analysis;
• Key drivers of debt instruments valuation;
• Most common optionality features of debt instruments (callability, puttability & conversion); and
• A series of practical examples to apply the concepts covered in the training.

Alternative assets valuation and valuation oversight: Infrastructure (2h)

The infrastructure sector sits at a collision point of global disruptions, including shifts in capital availability, evolving social and environmental priorities, and rapid urbanisation. Additionally, it has been proved that some profile of infrastructures (green energy or utilities transportation) present more financial and operational resilience than general investments during uncertainty periods like the COVID-19, increasing the appealing for this profile of investments among institutional investors who use them as a potential source of risk diversification.

The pressing global need for substantial infrastructure is widely recognised. The challenge isn't just to fund the massive investment required and target it at the right infrastructure projects. It’s also necessary to provide the required infrastructure on an affordable, socially equitable and environmentally sustainable basis.

Therefore, there is an emerging need of developing knowledge and critical thinking within the investors community in order to narrow the gap between funding availability and the market opportunities in the infrastructure sub-sectors.

This module will help you to get a deep understanding on the valuation concepts and recognised methodologies specific to Infrastructure assets.

The module will cover the following topics:

• Key technical concepts of infrastructure;
• Key valuation terms of infrastructure;
• Recognised valuation methodologies;
• Market multiples;
• Transaction multiples;
• Discounted cash flows;
• Risk assessment (discount rates adjustment for stage of life of the project); and
• A series of practical examples to apply the concepts covered in the training.

Alternative assets valuation techniques and valuation oversight: Real Estate (3h)

Real estate continues to be one of the most active and profitable investment opportunities. In today’s rapidly changing environment, real estate professionals are looking across the enterprise and are continuously assessing opportunities to grow revenue and better manage costs and risks in order to remain competitive in the marketplace.

The proper understanding of the key risk is of paramount importance and relates to the value of real estate assets.

This module will help you to navigate through the challenges associated with the valuation of Real Estates that constitute one of the most active and profitable investment opportunities.

In order to get an overall view of real estate assets valuation, this course is split into 2 parts: an overview on valuation techniques and valuation review process (oversight).

The module will cover the following topics:

Valuation techniques:

Valuation theory;

• Real Estate parameters;
• Valuation methodologies;
• Examples of valuation methodologies; and
• Local and European market updates.

Valuation oversight:

• Walking through a real estate valuation report;
• Review at report level;
• Review at asset level; and
• Suggested review procedure.

Alternative assets valuation and valuation oversight: Venture Capital (2h)

Venture capital has gained momentum over the past years and is expected to continue to do so in the context of the current market and economic environment. Venture capitalists support and provide financing to companies across various stages of development from seed stage to expansion stage, and even through Initial Public Offering (IPO) for the successful companies.

They have supported the emergence of new ideas, software and technology, medicine, or medical equipment, and have developed the venture capital into a thriving asset class. Early-stage companies nonetheless remain unprofitable for an extended period and are therefore continuously challenged on their ability to achieve key developmental milestones.

This uncertainty poses significant challenges to market participants to implement traditional valuation methodologies and techniques in order to perform fair valuation assessment of venture capital investments.

This module will help participants navigate through the challenges associated with fair valuation in this asset class.

The module will cover the following topics:

• Key terms and features of Venture Capital investments (including stage of development);
• Conceptual framework to perform the valuation assessment of Venture Capital investments;
• Recognised valuation methodologies;
• Probability-expected return weighting;
• Scenario analysis;
• Option pricing method;
• Milestones analyses; and
• A series of practical examples to apply the concepts covered in the training.

Our training sessions will be coordinated and delivered by PwC subject matter experts dealing on a daily basis with alternative assets valuation topics.

Alexandre Goossens
Alexandre joined PwC Luxembourg in September 2014 and is responsible for the real estate & infrastructure advisory services within our Alternatives Valuation Services (AVS) practice. Alexandre has been active in the real estate market and has gained a strong experience through his roles as consultant and valuer. He leads a team dedicated to the annual review of more than 1,500 assets in real estate, debt (backed by real estate collaterals), infrastructure and forestry with an exposure on world markets. Alexandre is responsible for the set-up of risk management tools for funds investing in alternative assets (real estate, infrastructure, real estate debt). He is also an active member of the Royal Institution of Chartered Surveyors (RICS).

Samir Moussaoui
Samir joined PwC in 2012 and is a director within our Alternatives Valuation Services (AVS) practice. He has developed expertise of the private equity industry in the context of assurance engagements, with a focus on business valuations & modelling. He developed an extensive knowledge and set of skills on valuation processes, techniques, and market practices along with the relevant auditing skills. Samir helps lead our AVS practice in managing and delivering a diverse range of alternative investments/assets valuation engagements in the context of assurance and non-assurance services to local and international clients and PwC offices. He has exposure to a wide range of valuation methodologies such as discounted cash flow models, trading and transaction multiple valuations, net asset value approach as well as milestone analyses, primarily in the context of financial reporting. Samir is a Chartered Financial Analyst (CFA) and Chartered Valuation Surveyor (MRICS). Samir is also an active member of the founding committee of the Luxembourg Valuation Professionals Association (LVPA).

Alix Altenor
Alix is an audit director in the Alternatives Valuation Services department at PwC Luxembourg within the Assurance Alternatives practice. He currently specialises in reviewing valuation models and assumptions used for private company equity and private debt valuations for financial reporting purposes. Alix has performed business valuations for a variety of purposes, including fair value accounting, impairment testing and deferred tax asset recoverability assessments. In his role, Alix has exposure to a range of valuation methodologies such as discounted cash flow models, trading and transaction multiple valuations, milestone analyses, and NAV as a practical expedient. He holds the Chartered Financial Analyst (CFA) designation and is a CPA licensed in the state of Massachusetts.

Rafaël Le Saux
Rafaël is a director within PwC Corporate Finance Luxembourg and leads the Valuation & Modelling Advisory services offering locally. Rafaël has 13 years of relevant valuation experience and, prior to joining PwC, was Conducting Officer Valuation for Partners Group’s AIFM, one of the largest in-house AIFMs in Luxembourg as well as standing member of all four asset-class specific global valuation committees overseeing more than USD 100b of AUM.

In his current role, Rafaël and his team support AIFMs with their valuation requirements, in particular with recurring portfolio valuation mandates for complex to value assets, including infrastructure, growth equity and venture capital investments.

Rafaël shows a strong expertise in valuation and modelling across several industries, is a Chartered Financial Analyst, a Chartered Alternative Investment Analyst, a Chartered Financial Modeller and Accredited in Business Valuation by AICPA. Rafaël is also vice-chairman of the Luxembourg Valuation Professionals Association (LVPA) and leads LVPA Technical Working Group.