Fund managers should keep valuation in-house

Hiring an external valuation expert as part of a fund manager’s valuation process is not a key requirement for Sarona Asset Management.

“When we select fund managers we pay particular attention to their experience, knowledge and ethical approach to company selection and ongoing valuation. We require annual audit accounts by a reputable firm, but we do not expect external third-party valuation experts,” Vivina Berla, co-managing partner at Sarona Asset Management, told sister title Private Equity International.

GPs are expected to regularly update valuations with changes to assumptions, methodologies or new industry guidelines. And not all firms have the capabilities, time or expertise in-house to meet the complexities involved in reporting, which is why many outsource this responsibility to third-party valuation experts.

However, Sarona, which backs GPs deploying growth capital to expansion-stage companies in frontier and emerging markets, requires the fund managers themselves to be valuation experts.

“Our fund managers should themselves be the best possible experts and Sarona then applies a sanity check before we report to our own investors,” added Berla.

Sarona Asset Management seeks to identify the best possible GPs based in and operating across Africa, Asia (excluding China), Latin America and emerging Europe.

The fund of funds manager currently invests in a number of emerging markets funds, including Riva y García Private Equity’s second North Africa-focused growth fund, Fons Mediterrània Capital II FCR, which closed on its target of €120 million, and Pera Capital Partners’ €50 million mid-market Turkish private equity fund, Pera Capital Partners Fund I.

Read more about Sarona Asset Management in PEI Data's H1 Fundraising Report 2016.