Comments on: The silliness of valuing hedge funds http://blogs.reuters.com/felix-salmon/2013/05/10/the-silliness-of-valuing-hedge-funds/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traducere romana daneza http://blogs.reuters.com/felix-salmon/2013/05/10/the-silliness-of-valuing-hedge-funds/comment-page-1/#comment-53524 Mon, 29 Sep 2014 13:57:30 +0000 https://blogs.reuters.com/felix-salmon/?p=21679#comment-53524 7 louis vuitton outlet EcU Louis Vuitton Bags TyS Louis Vuitton Handbags BiX Louis Vuitton Outlet TwU Louis Vuitton Bags EuX Louis Vuitton Handbags WdE Louis Vuitton Neverfull GfS Louis Vuitton Outlet DkB Michael Kors Outlet Xio Michael Kors Outlet BtB Michael Kors Hamiton XqE Michael Kors Handbags ElE Michael Kors Sale TqS Coach Factory Outlet ByX Coach USA Eto Coach Factory Outlet DiB Coach Factory Outlet Online RlX Coach Factory Outlet Online Eyo White Infrared 6s For Sale RiS Louis Vuitton Outlet Online XwB Louis Vuitton Handbags DyB Louis Vuitton Purses XtX Louis Vuitton Handbags YdS Louis Vuitton Outlet Store EqE Michael Kors Sale GuX Michael Kors Handbags BlS Michael Kors Wallet WwX Michael Kors Outlet WcX Michael Kors Factory Outlet RlX

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By: PLSD http://blogs.reuters.com/felix-salmon/2013/05/10/the-silliness-of-valuing-hedge-funds/comment-page-1/#comment-47024 Thu, 16 May 2013 00:29:58 +0000 https://blogs.reuters.com/felix-salmon/?p=21679#comment-47024 @dsquared, the point is not whether Citi got a good deal when it bought Old Lane- most Citi shareholders would argue that it didn’t. The point is that major banks and asset managers are actively involved in a growing hedge fund M&A environment, and those professional investors do not make M&A decisions with extensively modeling out the target firm’s valuation. Period. Salmon may think this exercise silly- it is in fact difficult to value the OTM call option component of future performance fees- but its what firms are doing every day. Look at DYAL Capital, a spin out of Neuberger Berman, which focuses on buying stakes in hedge fund sponsors. Look at seed capital providers like RMF/MAN- they are making valuation calculations when they take equity stakes in emerging managers.

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By: PLSD http://blogs.reuters.com/felix-salmon/2013/05/10/the-silliness-of-valuing-hedge-funds/comment-page-1/#comment-47011 Tue, 14 May 2013 18:33:56 +0000 https://blogs.reuters.com/felix-salmon/?p=21679#comment-47011 @dsquared: That doesn’t undermine his argument. The point is not whether Citi got a good deal when it bought Old Lane (Citi shareholders certainly wouldn’t think so). The point is that banks, and other large asset managers routinely buy hedge funds, and stakes in hedge funds, and that requires them to value those funds before making that purchase. Take for example DYAL Capital, an offshoot of Neuberger Berman; all they do is take PE stakes in hedge fund managers. Do you think they commit serious capital without applying a rigorous valuation process? Whether or not Felix Salmon thinks that the process of valuing hedge funds is “silly,” the fact remains that in the past few years, M&A activity in the hedge fund space has been accelerating, and the valuation of hedge fund managers- as tricky as that process may be- has been a regular part of the M&A process.

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By: dsquared http://blogs.reuters.com/felix-salmon/2013/05/10/the-silliness-of-valuing-hedge-funds/comment-page-1/#comment-46998 Mon, 13 May 2013 06:14:13 +0000 https://blogs.reuters.com/felix-salmon/?p=21679#comment-46998 “Indeed, Citigroup purchased a hedge fund, Old Lane Partners, in 2007 for $800 million. I am sure Citigroup would be astounded to learn that they had spent nearly a billion dollars on the basis of a “silly” valuation of the fund.”

This example considerably undermines the rest of the case.

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By: ezrazask http://blogs.reuters.com/felix-salmon/2013/05/10/the-silliness-of-valuing-hedge-funds/comment-page-1/#comment-46986 Sun, 12 May 2013 14:05:55 +0000 https://blogs.reuters.com/felix-salmon/?p=21679#comment-46986 I read your article, “the Silliness of Valuing Hedge Funds,” with interest. However, I was disappointed that it did not take the question of hedge fund valuation beyond “silly.” With the increased consolidation in the hedge fund industry, the issue is increasingly important.
I would argue that your article should have been titled “the Complexity of Valuing Hedge Funds.” I published in the Journal of Alternative Investments in 2000, “Hedge Funds: A Methodology for Hedge Fund Valuation,” which was based on my experience working for an M&A firm that specialized in the valuation of financial firms, including hedge funds. The article points out the complexity of valuing hedge funds, but also offers a framework for valuation. I recently wrote an update this article, “Trends in Hedge Fund M&A and Valuation: 2000-2013” which is available on my company’s website (www.sfcassociates.com). This article documents 28 M&A transactions since 2006 that involved alternative investment firms. My analysis reports the value of each deal and shows this value as a percentage of the acquired firms’ assets under management (the only publicly available metric).
The acquiring firms include Carlyle Group, Man Group, Royal Bank of Canada, JP Morgan, Credit Suisse, Bank of China, Mitsubishi Corporation, Blackstone Group, Morgan Stanley, Bank of Ireland, and Dubai International Corporation. I would have to assume that these firms did a valuation of the acquired hedge fund before spending billions of dollars. Indeed, Citigroup purchased a hedge fund, Old Lane Partners, in 2007 for $800 million. I am sure Citigroup would be astounded to learn that they had spent nearly a billion dollars on the basis of a “silly” valuation of the fund.
In valuing Napier Park Global Capital I used two standard, well-established methodologies – discounted cash flow and the hedge fund industry’s average AUM multiple. I believe that the issue of hedge fund valuations, while extremely complex, is far from “silly” and deserves a serious discussion. I recently published a book for McGraw Hill, “All About Hedge Funds, Second Edition” (2013) which I believe contributes to this discussion. (www.allabouthedgefunds.com)

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By: objectzach http://blogs.reuters.com/felix-salmon/2013/05/10/the-silliness-of-valuing-hedge-funds/comment-page-1/#comment-46967 Fri, 10 May 2013 17:37:32 +0000 https://blogs.reuters.com/felix-salmon/?p=21679#comment-46967 Hedge funds stakes are just like the stakes of any other private company: incredibly illiquid. While it’s worth questioning a consultant’s unjustified estimate, all anyone is going to have that is of any use is an estimate based on some DCF or what have you. Why start at zero? Absent any willing buyers, a private company – say with a real business and stable cashflows – should just be considered worthless? The private markets aren’t so efficient that there will necessarily be willing buyers of such obviously valuable businesses in all cases – and a glaringly obvious such case is that of hedge fund sponsors. This isn’t a question of the metaphysics of economic value; the question is “what is the use to anyone of defining an illiquid company as valueless until otherwise bid on?” I would suggest there’s little use…

Due to future fee uncertainty, hedge funds should be difficult to value but not impossible to. They’re going to be at most as difficult to value as a VC investment, which is essentially an OTM call option.

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