By Cindy Valentine and Ravi Chopra King & Wood Mallesons’ London office

valentine_cIn our last issue of Made in Africa (Issue 14), we discussed increasing interest in permanent capital vehicles (PCVs), covering an overview of the key drivers for PCVs, limitations in respect of investor appetite and a high level comparison of PCV structures and terms as compared to a ‘typical’ PE fund structured as a fixed life, self-liquidating limited partnership (a “Typical Fund”).

In this piece, we focus on a key feature of the PCV formulation: valuation. The method of valuation of the assets of the holding vehicle impacts, for example, upon the economics of investor admission, as well as fees, which are often calculated in full or in part on NAV, and incentivisation. Investors therefore seek a robust approach to valuation in part to ensure they are not overpaying in any of these areas. If a PCV lists on a stock exchange, the valuation of the PCV assets will also tie into the market price and the perception of whether, absent other market considerations such as the relative attraction of different sectors, the valuation presented by the manager is reasonable.

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