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Valuation of an asset management company (fund of funds)
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Assignment
We recently completed an independent valuation of an asset management company in the Fund of Funds space - the purpose was to determine their carrying value in their parent’s year-end financial statements.
Our Approach
Outcome
We performed a detailed risk and return analysis of each Fund of Funds by assessing the projected cashflows, carried interest, assets under management (AuM), fund management fees, and MoIC (Multiple of Invested Capital). We used the Income Approach in conjunction with the Sum-of-Parts method to arrive at the fair value of the asset manager.
We were able to defend to the parent's auditors the valuation by showcasing the risk-weighted returns based on the two revenue streams of the funds –the AuM fees and the back-ended incentive fees ratcheted by a high watermark.