The valuation of the portfolio of Alternative Investment Funds (AIFs) is a key element of asset management and ensuring transparency towards stakeholders. Regularly carrying out this process makes it possible to accurately assess the performance of portfolio companies and to provide a reliable picture of the fund’s current situation.
Fair value as the basis of valuation – The valuation of AIF assets is based on fair value, which enables a realistic assessment of the value of individual assets and liabilities. This approach arises from the requirements of the Accounting Act and the Regulation on the recognition, measurement, disclosure, and presentation of financial instruments, which are mandatory for Alternative Investment Funds.
Key elements of portfolio valuation – The portfolio valuation process of an AIF focuses on determining the net asset value (NAV) and the value attributable to each unit of participation. The fund valuation is carried out in three key cases:
Preparation of financial statements – ensuring compliance with accounting regulations.
Periodic fund valuation – regular update of the net asset value (NAV).
Subscription or redemption of units – precise determination of the investment value for investors.
The valuation of an AIF’s portfolio is a process that requires expert knowledge and the application of recognized market standards.
There are no formal restrictions regarding the persons or entities preparing the valuation of investments. AIF managers may carry out the valuation of investments themselves. However, it should be noted that a conflict of interest arises when the valuation is performed by persons who acquired the given investments. Taking this into account, for part of the market, confirmation of an adequate valuation is ensured by entrusting this process to an external, independent entity.
At the beginning of the process, the fund’s internal documentation should be reviewed, as it specifies the statutory and customary requirements related to the valuation process. This includes regulations concerning valuation methodologies, accounting policies, and any internal procedures that may affect the process. Such verification makes it possible to establish the fundamental assumptions of the valuation.
Inventory is a detailed review of the fund’s investment portfolio. At this stage, all financial instruments held by the fund are identified, including shares, bonds, and other assets. The process also involves confirming quantitative and formal records through external registers, such as depositaries or commercial registers. The objective is to ensure that all data is accurate and complete.
Based on the data collected during the inventory, the assets and liabilities are classified. Each element of the portfolio is assigned to the appropriate categories in accordance with the Regulation or the fund’s internal documentation. This classification is crucial, as it determines the valuation methods applicable to each type of asset. For example, shares in unlisted companies may require an income approach, whereas instruments traded on a regulated market will be valued based on market prices.
The valuation process consists of applying appropriate methodologies in line with the adopted accounting principles and the fund’s valuation policy. It is important that the process remains consistent with previously applied methods and complies with regulatory requirements. At this stage, financial analyses, valuation models, and market data are often used. The involvement of independent experts is also crucial in the case of more complex assets.
The final stage is a detailed analysis of the valuation results. Verification covers both technical aspects (e.g., correctness of the formulas and models used) and substantive aspects (e.g., compliance with regulatory and internal documentation). In addition, at this stage an internal or external audit may be carried out to ensure that the valuation results are reliable and aligned with stakeholder expectations.
Setup Establishing internal processes and procedures related to the valuation of investments. We offer our clients a dedicated tool for transferring data between portfolio companies and the fund, which significantly simplifies the data collection stage. In addition, it enables the recording of capital increases in portfolio companies, which is important for the inventory of positions subject to valuation. By choosing to set up the investment valuation process with Genprox, you receive a comprehensive solution that structures a key operational process in your fund.
Valuation We carry out valuations both for the entire fund portfolio as well as for individual investments. The purpose of our work is not only to determine the value of specific assets and liabilities, but also to provide justification for them in communications between the fund and its stakeholders. By conducting the valuation process with Genprox, you can be certain that it is performed in line with the highest standards of the domestic market.
Managers – the value of the portfolio is a key measure of the effectiveness of the investment policy pursued. Therefore, virtually every manager is strongly interested in the increase in portfolio value, even when it comes to “paper gains.
Investors – the value of the portfolio investments is a key component of the fund’s valuation. It is in the best interest of both current and future investors that the portfolio value is assessed reliably. If investments are valued below fair value, exiting investors will incur losses (while entering investors will benefit). Conversely, if investments are valued above fair value, the situation will be reversed.
Auditors – a key element of the audit of an AIF’s financial statements is the review of the portfolio and the verification, both formal and substantive, of the correctness of the fair value assessment.
FSA (KNF) – AIFs are subject to an annual reporting obligation to the Polish Financial Supervision Authority (KNF), where one of the objectives of this process is to confirm the value of assets under management.
Analysis of future income and its impact on the current value of the company. Income-based methods (including the DCF method – Discounted Cash Flow) are approaches to company valuation that assume the value of a business lies in its ability to generate surpluses of revenues over expenses. Within income-based valuation methods, future cash flows are therefore projected over a defined time horizon.
Comparing the company with similar businesses in the market Multiples methods, also known as comparative valuation methods, are another very popular approach. They are based on available financial ratios (such as P/E, EV/EBITDA), comparing the company under review with the most similar entities. This method is not only very straightforward but also relatively objective, as it avoids subjective forecasts and judgments.
Asset-based valuation methods are approaches that primarily take into account the assets of the entities being analyzed. However, basing the assessment on the book or market value of assets has one drawback: the difficulty of valuing certain asset components, such as intangible assets and intellectual property rights.
Genprox Advisory therefore provides top-quality services for VC/PE funds, industry investors, and portfolio companies. Each year, we prepare several hundred valuations of portfolio components for alternative funds operating in the form of AIFs.
We are an accounting and advisory firm specializing in the accounting of AIFs. We possess broad professional expertise and hold certifications such as Investment Advisor, ACCA, and Tax Advisor. This enables the VC funds we serve to receive, in one place, a comprehensive service unavailable from any other accounting firm or law office. We specialize in servicing VC funds and have a deep understanding of their reporting needs. As a result, we are able to provide full accounting, tax, and reporting support for any type of VC/PE fund in Poland as well as for alternative funds in Luxembourg.
The valuation of portfolio assets of Alternative Investment Funds (AIFs) is the process of determining the fair value of the fund’s individual assets and liabilities. This value reflects current market conditions and regulations, and its purpose is to ensure transparency and reliability for both managers and investors.
Fair value ensures the reliability and transparency of the valuation, minimizing the risk of incorrect investment decisions. It provides investors and managers with a clear picture of the true value of the assets.
The most commonly used methods include income-based approaches such as DCF (Discounted Cash Flow), comparative methods based on market multiples, and the cost approach. The choice of method depends on the type of investment and its stage of development.
Valuations should be carried out regularly, e.g., on a quarterly basis, as well as in situations requiring up-to-date data, such as the preparation of financial statements, the onboarding of new investors, or decisions regarding the disposal of assets.
The valuation of a fund’s portfolio directly affects the value of participation units, which is important for both current and future investors. A reliable valuation increases confidence in the fund and supports investment decision-making.
Yes, the valuation of a fund’s assets is required under accounting regulations and the rules governing Alternative Investment Funds (AIFs), including for the preparation of financial statements and reports for the Financial Supervision Authority (KNF).
The valuation process requires detailed financial data on the investments, the terms of investment agreements, market conditions, and records of capital changes in portfolio companies.
The duration of the valuation depends on the number and type of assets as well as the availability of data. A typical process takes from a few days to several weeks, depending on the complexity of the portfolio.
The audit of the valuation includes verifying the compliance of the applied methods with accepted standards, analyzing the input data, and assessing the accuracy of the assumptions used in the valuation process.
Yes, Genprox offers both comprehensive valuations of entire fund portfolios and individual valuations of specific investments, tailoring the methodology to the nature of the assets.
Genprox provides dedicated tools that facilitate data exchange between portfolio companies and the fund, and offers expert support in valuation methodology and regulatory compliance.
NAV (Net Asset Value) is the net asset value of the fund, which determines the current value of a participation unit or a share in the fund. It is a key indicator used to assess the fund’s performance.
VC/PE funds should update their valuations at least quarterly, or more frequently if required by investment agreements, market changes, or regulatory provisions.
The valuation of AIFs is carried out in accordance with international guidelines, such as the International Private Equity and Venture Capital Valuation (IPEV) Guidelines, as well as local accounting regulations.
Yes, market analysis is an integral part of the valuation process. It includes an assessment of market conditions, sector trends, and comparison with similar assets in the market.
An incorrect valuation may lead to flawed investment decisions, loss of investor confidence, issues with auditors, and potential regulatory sanctions.
Yes, Genprox supports clients in preparing reports in line with the requirements of the Financial Supervision Authority (KNF), including the valuation of assets under management.
Working with Genprox provides access to experts with experience in the VC/PE market, dedicated tools supporting the valuation process, and assurance of compliance with the highest standards.
Asset valuation is the basis for strategic decisions such as capital allocation, attracting new investors, and planning exit strategies from investments.
To start the cooperation, simply contact Genprox via the form on the website or by phone. The company’s experts will prepare an offer tailored to the needs of your fund.