Knowing the value of assets is the bread and butter of investment capital companies. However, this market has growing demand for transparency, not to mention equity. Investors are not the only ones to press these problems, because the American Commission for Securities and Exchange has extended its surveillance and its resources to investigate predatory investment practices. It was then that the assessment of third parties comes into play.
It is too early to say that it is a common practice among investment capital companies, as less than 25% are currently subcontracting the evaluation services. However, it is an upward trend of this market which can ultimately change Investment decisions For large and small businesses. Here is why the assessment of third parties is so important in this niche and why Acquinox.Capital is the best company for the task.
Not a third wheel
The independent evaluations of investment capital have become a sign of reliability for stakeholders. These evaluations are generally more robust and reliable because they come from a party which is not involved in the agreement. But it hasn’t always been like that. The wave of skepticism increased with the 2008 crisis, which was reacted by a new law, the law on the registration of private investment advisers in 2010.
The central aspect of this law concerns “fair market value”, which means that investive capital companies must mark their positions according to the sale price. Thus, no matter what investors want to do with the assets later, whether they keep it or become again; Prices must always be based on the market.
Indeed, most investment capital companies have enough skill And experience do the work. However, this niche became skeptical after the crisis. In this context, third-party assessments assess those already carried out by investment capital companies, by checking whether they are accurate or realistic.
Evaluations can take 45 to 60 days to end. This period is not a problem under normal market conditions, but can be a lot in volatile periods. Too often, companies hesitate to reduce the value of certain assets during slowdowns, but can be very enthusiastic about the idea of scoring them in bullish periods. In this context, investors trust third -party assessors more, especially when they plan risk assessment.
What are third -party assessors doing?
According to the quarterly SEC declaration rule, limited partners must have access to quarterly declarations. Such declarations should provide significant and precise information concerning the performance of the company, guiding the decisions of investors concerning Selection of projects.
In fact, the SEC does not specify whether these declarations must be made by third-party assessors, investment capital companies or even internally. However, the outsourcing of these services can give more credibility to the figures presented to potential investors, mainly averse risks. Some large companies save resources to create an internal assessment committee.
Third-party assessment services can give more legitimacy to their number, or perhaps not, and that is why they are so important. Investors and limited partners like to see the independent evaluation services of the project manager, thus avoiding the trap of biased numbers. Thus, one of the main functions concerning third -party assessors is to provide additional evaluation reports that corroborate internal prices.
Otherwise, red flags can increase, reporting that it is a bad deal. These assessors help companies comply with local regulations and provide monthly reports. Investors have recently requested independent due diligence Before making investment decisions.
Investigation capital companies under surveillance
The investment of investment has prospered impressively in the past decade, growth figures exceeding 100%. This strong increase contrasts with the reduction of 50% of companies listed on the US stock market in the past 20 years. As industry develops, it also increases the interest of investors and legislators for what PE companies do.
Although PE companies do not lose importance, investors and limited partners wish more information concerning their methods. This includes the details of how fund managers perform these calculations in the first place. The keyword here is “transparency” because new investors want to know how PE companies develop and benefit from their portfolios. Thus, these companies can expect to deal with a more experienced examination in the coming years.
The office of inspections and compliance examinations (OCIE) has found through academic evidence that prices are generally swollen at the stage of fundraising. Worse still, some EP companies have been taken in the act of disclosing specific assessment methods while, in fact, they used different.
He has placed fund managers under a magnifying glass, which is now in a hurry to maintain coherent methodologies throughout the process, clearly describing any exception that could arise. In addition, the SEC modified the rules of private fund counselor in 2023, further regulating the EP market.
EP companies challenged these rules before the court in 2024, but most of them are still held. According to new rules, PE advisers must avoid activities that can create a conflict of interest and are no longer authorized to provide remuneration plans to investment advisers.
Faq
What is the assessment of third parties and why is it important?
Third-party assessors are independent professionals or companies who assess the evaluations of investment capital to ensure their precision and fairness. Since these assessors are involved in the agreement, investors often consider their opinions as more reliable.
What do third party evaluation services understand?
Services include evaluation reports, which will be compared to the internal prices provided by a company. Monthly and quarterly reports and, sometimes, reasonable diligence are also part of the agreement.
Is third assessment compulsory by the rules of the dry?
No way. Investment capital companies are always authorized and capable of managing quarterly declarations and other reports. However, the use of these services can give companies a competitive advantage over more investors opposed to risks.