to the presentation

Deloitte Valuation
Conference
AIFMD valuation topics for asset
servicers
24th February 2015
Agenda
Introduction
3
Focus on Roles and responsibilities of the Fund Administrator and Depositary
6
Case studies
9
Panel
13
Q&A and wrap-up
15
© 2015 Deloitte Tax & Consulting
2
Valuation for alternative investment funds (AIF)
Main scope for today
Overview of key stakeholders and related responsibilities
Responsibilities:
• Day-to-day NAV calculation and trigger
escalation process
• Ensure valuation models and policies
are appropriate
• Act as external valuer if appointed
by the AIFM*
Responsibilities:
• Perform oversight on NAV calculation
and be involved in escalation of NAV
issues
• Ensure valuation of AIF assets is
independent and appropriate for each
AIF
• Understand valuation models and risk
management framework
© 2015 Deloitte Tax & Consulting
3
*
If CA is appointed as External Valuer, roles and responsibilities are more important
Potential synergies
Valuation: multiple actors with multiple responsibilities
What are the main questions we will treat today?
NAV calculation process review
BoD
Delegation
Portfolio Managers
AIFM
Delegation
BoD
Central
Administrator
•
Due diligence, how far
must everyone go?
•
External Valuer, is it a
permanent stakeholder?
•
How far do providers need
to go in the review of
valuation models?
•
Do services participate to
the Valuation Committee?
•
NAV oversight by the
Depositary Bank
•
Investor disclosure
•
Escalation process
Conducting Officers
Valuation Committee
Delegation
Responsible for NAV
calculation and portfolio
valuation of funds
Appoint
Independent
Valuer
Depositary
Valuation
oversight
Funds
Appoint
Auditor
Audit of financial statements
© 2015 Deloitte Tax & Consulting
4
Agenda
Introduction
3
Focus on roles and responsibilities of the Fund Administrator
and Depositary
6
Case studies
9
Panel
13
Q&A and wrap-up
15
© 2015 Deloitte Tax & Consulting
5
Roles and responsibilities of all actors in the
valuation value chain
Define and implement
valuation model and
policy
Perform valuation
function
Oversight of
valuation delegates
and models
ILLUSTRATIVE
Escalation and
intervention on
valuation issues
Main scope for today
NAV Calculation
• Ultimately responsible
• Make decisions on
for valuation
valuation issues
• Understand and approve
following escalation
model and policy for
process
each share class
• Perform due diligence
on models and
delegates
• Ensure escalation
process is in place
• Make decisions based
on escalation
• Liaise with Auditors and
valuation delegates
• Oversight on Fund
Administration delegate
Risk Manager
• Review valuation model
and policy
appropriateness vs AIF
risk profile
• May not be involved in
Portfolio Management
• Ensure DB can perform
oversight vs risk profile
of the fund (information
flow)
• Be involved in the
escalation process and
intervention
• Ensure NAV process is
appropriate
Internal Valuer
• Set-up valuation policy
and models per asset
class (inc. regular
update)
• Perform valuation*
• On-going review of
models & policy
• Oversight of valuation
expert appointed (where
applicable)
• Trigger and initiate
escalation process
• Provide Data/price for
NAV Calculation
External Valuer
• Set-up valuation policy
and models per asset
class (inc. regular
update)
• Perform valuation*
• On- going review of
models & policy
• Oversight of valuation
expert appointed (where
applicable)
• Trigger and initiate
escalation process
• Provide Data/price for
NAV Calculation
• Ensure policy and
procedure is
independent and
appropriate
• N/A
• Ensure valuation is
independent and
appropriate
• Ensure escalation
process is appropriate
• Be involved in the
escalation process
• Perform oversight on
NAV Calculation
• Be involved in NAV
escalation process
• Only if appointed as
external valuer
• Only if appointed as
external valuer
• Review valuation
models and policies
• Only if appointed as
external valuer
• Day-to-day NAV
calculation
• Trigger escalation
process in case of NAV
issues
Board Directors,
conducting officers
and/or Valuation
committee
Depository
Central
Administration**
© 2015 Deloitte Tax & Consulting
* If an external valuation expert is appointed, review of the valuation
** If CA is appointed as External Valuer, roles and responsibilities are more important
6
Market practices addressing the regulatory obligations
Oversight
Valuation policies
Perform Depositary due diligence
Perform AIFM due diligence
Valuation Delegates due diligence
Review of valuation policies
Tripartite operating memorandums
Risk based approach oversight on NAV
Review models and policies
Be involved in escalation process
NAV calculation
Trigger escalation process
Review models and policies
Second level review on valuations
The level of requirements can vary depending on the following aspects:
•
Operational set-up (integrated vs non-integrated)
•
Risk profile and valuation lifecycle of the fund
•
Asset classes (PE, RE, HF, Marked to Model)
•
Risk appetite of the actors
Source: Deloitte Analysis
© 2015 Deloitte Tax & Consulting
7
Agenda
Introduction
3
Focus on roles and responsibilities of the Fund Administrator
and Depositary
6
Case studies
9
Panel
13
Q&A and wrap-up
15
© 2015 Deloitte Tax & Consulting
8
Case studies (1/3)
Fund of Hedge Funds*
Valuation risk report
Depositary
BoD
External provider
Valuation oversight
• Compare estimated NAV’s
to final NAV of HF’s
• Collect target fund financial
statements (FS)
• Review and analyse target
fund FS
AIFM
Central
Administrator
BoD
Conducting Officers
NAV Calculation
Valuation Committee
Portfolio Managers
Fund of Hedge
Funds
© 2015 Deloitte Tax & Consulting
Source: Deloitte analysis
Target
Funds’ NAV
Hedge
Fund 1
Portfolio 1
Hedge
Fund 1
Portfolio 2
Hedge
Fund 1
Portfolio 3
Auditor
NAV process review
9
*Fund valuation delegated to central administrator
Case studies (2/3)
•
•
•
•
Real Estate Fund
Understand the set-up
Risks identified and mitigated?
Procedures applied / up-to-date?
Structure monitoring (ownership,
cash, etc.)
Depositary
Properties values
AIFM
BoD
Investments
values
• NAV calculation (INREV)
• Fund reporting / discl.
• Reliance on third parties
Central
Administrator
Conducting Officers
Real estate
Appraiser
• Accounting / Consolidation
• Book values (GAAP)
• Accounts completeness / validity
Valuation Function
Accounting Agent
Portfolio Managers
PropCo 1
RE Funds
(closed-ended)
Fund
holding
SPV
PropCo 2
PropCo 3
© 2015 Deloitte Tax & Consulting
Source: Deloitte analysis
10
Case studies (3/3)
Mark to model*
Valuation control
Delegation
Depositary
External provider
Valuation oversight
AIFM
Central
Administrator
BoD
Valuation Committee
Portfolio Managers
OTC
Counterparty
Derivatives valuation
Funds
Pricing comparison

Escalation process
Portfolio primarily
composed of OTC
derivatives
© 2015 Deloitte Tax & Consulting
Source: Deloitte analysis
Analysis of differences with
vendors and counterparties



*Fund valuation delegated to central administrator
Fund’s NAV Calculation
AND/OR
External Provider
AND/OR
Internally developed
valuation model
AND/OR
External valuation
model
Market Data Provider
NAV Calculation
Conducting Officers
Valuation model
due-diligence
Model vendor
Counterparty prices within
defined tolerance
11
Agenda
Introduction
3
Focus on roles and responsibilities of the Fund Administrator
and Depositary
6
Case studies
9
Panel
13
Q&A and wrap-up
15
© 2015 Deloitte Tax & Consulting
12
Our panellists
Arnaud Bon
Private Equity & Real Estate Leader SGG Group
Arnaud joined SGG in 2009 as Operational Leader of the Fund Servicing department. Today, he is the firm’s Private Equity & Real Estate Industry Leader.
As a Paris bar registered lawyer, he previously worked for Allen & Overy as a lawyer for Alternative Investment clients. Arnaud has advised on innovative
alternative fund structuring and organizational models for leading fund managers.
He has a Master’s degree II in Business and Financial Law and Magistère of Business Law from Sorbonne University (Paris).
Born in France, Arnaud is a native French speaker, as well as fluent in English; he is also proficient in Greek.
Pierre-Antoine Boulat
Managing Director
Function: Chief Executive Officer UBS Fund Services (Luxembourg) S.A. and Head Asset Servicing Delivery at UBS in Luxembourg
Pierre-Antoine Boulat joined UBS Global Asset Management as Head of the Operations and IT Global Program Office in October 2006.
He was appointed Head of Fund Services in Luxembourg in September 2011, responsible for the successful development of Global AM’s internal and
third-party full value chain (from Management Company Services to Fund Administration and Transfer Agency) offering to institutional and quasiinstitutional (Wealth, Family Offices, Financial Intermediaries, Asset Managers, Banks) client franchise in the market as well as the availability of a
commercial, profitable and high quality capability offering.
From May 2012, in the context of the Integrated Bank in Luxembourg, Pierre-Antoine took up additional role in Asset Servicing Europe, and is today Head
of Asset Servicing Delivery in charge of client relationship management and client service.
Yvan de Laurentis
Head of Depositary and Fiduciary Services
Born in Marseille, France in 1974, Yvan graduated in Economics from the Ecole Supérieure de Commerce de Marseille-Provence in 1997.
Since October 2004 Yvan has been heading and actively supporting the developement of BNP Paribas Securities Services Luxembourg’s Depositary and
Fiduciary Services departement. In that role he is in charge notably of the fund depositary supervision, the fund hosting solution, the monitoring of funds
investment rules and the legal fund engineering department.
He is also an active of Member of ALFI and various committees and working groups including the Luxembourg DepoBank Forum and HR & Training
Committee.
Nico Thill
Directeur and Head of Investment Fund Services Banque de Luxembourg
Nico Thill, born in 1968, has over 20 years experience in the Luxembourg’s investment funds industry. He is currently member of the management of
Banque de Luxembourg where he heads the Investment Fund Services’ business. Nico Thill holds a degree in Business Administration from the University
of Liège and a degree in Commercial Engineering from the Hautes Etudes Commerciales in Liège, Belgium.
© 2015 Deloitte Tax & Consulting
13
Agenda
Introduction
3
Focus on roles and responsibilities of the Fund Administrator
and Depositary
6
Case studies
9
Panel
13
Q&A and wrap-up
15
© 2015 Deloitte Tax & Consulting
14
Q&A
© 2015 Deloitte Tax & Consulting
15
Thank you
If you have any questions or comments, please contact valuation@deloitte.lu
Key contacts
Strategy & Corporate Finance
Simon Ramos
Partner – Investment
Management
+ 352 451 452 702
siramos@deloitte.lu
© 2015 Deloitte Tax & Consulting
Strategy & Corporate Finance
Pierre Masset
Partner – Corporate Finance Leader
+ 352 451 452 756
pmasset@deloitte.lu
16