Agree with all of that, except they independently value PE assets as well as their RE assets (apparently KPMG does their PE assets).
"Art v science" as a description of the asset valuation process is absolutely correct - regardless of whose opinion it is (independent or otherwise), it's always just that - someone's opinion. I've seen first hand "independent" valuations being ramped nearly 10% across an ASX-listed REIT's portfolio because the manager thought the independent valuer's valuations were garbage - it went through a heated iterative process, and eventually the valuer magically came around to the manager's way of thinking. The same old question is omnipresent - how independent is an opinion if that opinion is being paid for by the opinion's recipient?
So, what I go back to are facts and incentives, which are:
- they've realized 34 of 39 funds at or above carrying value, and
- they're not really incentivized to ramp valuations across >75% of their AUM because, according to last night's disclosure, they take base fees on historical cost rather than mark to market values of the underlying assets.
I think the second point is particularly important - if they're genuinely not economically incentivized to push valuations on >75% of their AUM as they say, then why would they? Doing so would simply put them on a hiding to nothing - there's no economic upside, and then they'd be at risk of consistently realizing a loss on sale, which would kill their credibility with investors which goes to the heart of a fund manager's business model.
BLA Price at posting:
$8.47 Sentiment: None Disclosure: Not Held
