SEBI has made the manager and key management personnels of Alternative Investment Fund (AIF) responsible for appointing an independent valuer of asset, and ascertaining true and fair valuation of the investments of AIF schemes.What percentage deviation in valuation at the asset level would require the manager of an AIF to inform investors about the reasons for the deviation?

Solution

SEBI has made the manager and key management personnels of Alternative Investment Fund (AIF) responsible for appointing an independent valuer of asset, and ascertaining true and fair valuation of the investments of AIF schemes.  In case the established policies and procedures of valuation do not result in fair and appropriate valuation, the manager should deviate from the established policies and procedures to value the assets or securities at a fair value and document the rationale for such deviation.     At each asset level, in case there is a deviation of over 20 per cent between two consecutive valuations or a deviation of over 33 per cent in a financial year, the manager shall inform the investors the reasons for the same.   Valuation of securities not covered by SEBI norms should be carried out as per valuation guidelines endorsed by any AIF industry association, which has membership of at least 33 per cent of SEBI-registered.     The independent valuer should have at least three years of experience in valuation of unlisted securities and should not be associated with the manager, sponsor and trustee of the AIF.      An AIF has to obtain consent of 75 per cent of investors by value for launching ‘Liquidation Scheme’ during the liquidation period of one year of the original scheme.