Valuation of illiquid or hard-to-value assets is a perennial business and compliance challenge for hedge fund managers. Because valuations have a direct impact on manager compensation; the price at which investors enter and exit a fund; and the manager’s track record, valuation is also always on the SEC’s radar. A recent webinar presented by the Hedge Fund Law Report explored how assets are classified in the fair value hierarchy; common valuation challenges; valuation frequency, processes and governance; the use of valuation committees and third-party valuation agents; the impacts of the coronavirus pandemic on valuation; and the effect the impending transition away from the London Interbank Offered Rate may have on valuation models. Robin L. Barton, Associate Editor of the Hedge Fund Law Report, moderated the discussion, which featured Benjamin Kozinn
, partner at Lowenstein Sandler, and Hugh Nelson, director in Houlihan Lokey’s portfolio valuation and fund advisory business. This article presents the key takeaways from the program. For a discussion of the SEC’s concerns regarding valuation, see “Steps Advisers Can Take to Minimize the Risk That a Routine SEC Examination Ends With a Referral to Enforcement: Five Key Priorities for OCIE (Part One of Two)
” (Jan. 4, 2018).