Approach to Valuation of the Investment Portfolio of AIF

The term “alternative investment fund” describes a group of pooled investment funds that invest in hedge funds, venture capital, private equity, and other sorts of investments. A company or a (LLP) Limited Liability Partnership can set up an Alternative Investment Fund.

An independent valuer is a person who possesses membership in the Institute of Chartered Accountants (CA) of India, Institute of Company Secretaries (CS) of India, Institute of Cost Accountants of India, or CFA Institute and is a valuer registered with the Insolvency and Bankruptcy Board of India appointed for the valuation of investment portfolios of AIFs.

Category I and II AIFs invest predominantly in unlisted securities where the market price is unavailable and the requirement for an independent valuer has been mandated. It is believed that defining objective standards for a third-party appraiser is crucial, particularly when assessing an investment portfolio of unlisted securities, which calls for a specialised skill set.

A standardised approach with regard to valuation methodology, principles and standards for valuing an investment portfolio is one of the steps to ensure fair disclosure of the investment portfolio’s value to the investors. This circular is issued mainly for the fair and consistent performance of the AIF industry.