This Valuation Policy (Policy) is designed to enable BMYG Capital Pty Ltd (BMYG Capital) to appropriately manage the governance of its investment activities in its capacity as trustee of any investment scheme (Fund). As a Trustee, BMYG Capital has an overarching obligation to act in the best interests of the beneficiaries of the Fund.
This policy will be reviewed at least every two years. Any changes made will be updated on the BMYG Capital’s website at www.bmygcapital.com.
The objective of this policy is to ensure that the Fund’s investments accurately reflect their net market value at any point in time:
to assure equity among members entering, exiting and continuing with investment options within the Fund; and
to enable the Trustee to confidently produce financial statements that represent a true and fair view of the net position of the Fund and fulfil the Trustee’s regulatory requirement.
This Policy is designed to provide the framework for the Trustee’s investment valuation process, which is central to the Trustee’s investment strategy and operations, is a key component to the Trustee’s unit pricing process and financial statements. This policy outlines the Trustee’s approach to valuation issues such as instruction, frequency, and review.
This Policy also provides the guidelines for trigger events and circumstances warranting ad-hoc (i.e. outside of the valuation schedule) re-valuations of unlisted assets.
For clarity, this Policy applies to the valuation of the assets of the Fund with respect to the recording of asset valuations on an ongoing basis, the calculation of unit prices, the preparation of financial statements and the like. This Policy does not apply to the commissioning of valuations or similar evaluations for the purposes of providing the Trustee with second opinions, for making assessments of asset acquisitions or for assessing offers made for Fund assets, or any other special purpose or ad hoc valuation exercises.
This policy illustrates the valuation of a range of asset classes, including listed and unlisted assets.
This includes investments in traditional listed and liquid asset classes such as shares, fixed interest and cash, as well as investments in alternative assets including alternatives credit, property, infrastructure, private equity and other.
Each Unit Class of the Fund represents a different allocation to the listed and liquid asset classes and the alternative asset classes, or in the case of the asset class options, a single asset class. The Trustee utilises a unit pricing methodology to attribute the Fund’s net assets to each investment option and then to unitholders. Therefore, it is essential that the value of net assets is current at any point in time to calculate accurate unit prices for each Unit Class.
In determining the fair value measurements and accounting for any transaction costs, the Trustee should apply the relevant principles and requirements in other applicable Australian Accounting Standards, including in particular AASB 13 Fair Value Measurement. AASB 13 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date”.
Given the high transaction costs typically associated with alternative assets and erring on the side of conservatism, the Fund applies a buy/sell spread for specific unit classes to allocate these transaction costs in an equitable manner.
All foreign currency denominated assets are recorded in local currency and converted to the Australian dollar equivalent using at the ask price for the relevant exchange rate obtained from http://marketrates.anz.com. Accordingly, all independent valuations of the Fund’s assets are undertaken by the valuers in local currencies.
4. Listed assets and assets traded on recognised markets
These assets are traded on regulated exchanges or recognised markets. They typically include listed equities, government bonds, traded corporate bonds, short-term money market securities, deposits and foreign exchange contracts.
In general, these investments will be valued at the closing listed price, which, by definition, represents a gross realisable value.
Transaction costs related to sale to settle on the “Net Market value” are then included in the calculations used by the Trustee to determine the buy/sell spread applicable for these assets. These costs are based on an assessment of the expected transactions costs and the historical costs incurred for these assets. These are then applied on a weighted basis to the various investment options holding these assets.
Valuation may be made on a monthly basis unless more frequent valuations are required by funds’ governing documents or mandates.
Data will be collected from trustworthy platform such as Bloomberg, Market Index, etc. Other reliable sources of data may be used where needed.
5. Externally managed unlisted investments
This category typically includes unlisted pooled investments in alternatives credit, property, infrastructure, private equity (including externally managed private equity co-investments) and other assets. The valuation of these pools or directly held securities is undertaken by the Investment Manager or Responsible Entity and advised as a unit or security price to the Fund’s Trustee.
The valuation standards applied by the manager or responsible entity in these valuations typically follow industry guidelines (such as the rules set out in the International Private Equity and Venture Capital Guidelines) or standards set by the constituent documents of the pool or the management agreement.
The Trustee engages the Investment Manager to provide oversight services for each investment to ensure that the basis of valuation is satisfactory to the Trustee and that the valuations themselves have been carried out according to the relevant standard.
The market value of these investments should be determined based on the net asset value price or redemption price (where application and redemtpion prices are reported).
The Trustee makes an assessment of any transaction costs related to sale to settle on the net asset value or redemption price. Transactional costs may vary across different assets due to differences in complexity and liquidity. These costs are then utilised in the calculation of the buy/sell spread which is applied on a proportional basis across those investment options holding these assets.
It is noted that in some circumstances particular pricing policies for individual classes of investments will be determined by the capacity and policies of the Fund’s Investment Manager. In these circumstances the Trustee is responsible for reviewing such policies to ensure consistency with the Trustee valuation parameters.
Valuation may be made on a monthly basis (when data from underlying investment is available) unless more frequent valuations are required by funds’ governing documents or mandates.
6. Directly held unlisted investments
This asset category includes direct investments in alternatives credit, property, infrastructure and private equity. It also includes thinly traded corporate debt securities that are not traded through regulated exchanges or recognised markets.
In most cases, the valuation of investments in this category will require assessment of their specific cash flows and investment terms, with the valuation often based on comparable transaction parameters and risk adjusted discount rates.
The investments are generally held at cost for the first twelve months of ownership unless there is an apparent change in circumstances which would indicate the need for a new valuation. The costs of acquisition are used as inputs in the calculation of the buy/sell spread which is applied on a proportional basis across those investment options holding these assets.
For Unlisted Equities, such securities may be valued at cost until the Trustee or the Investment Manager of a fund determines that cost no longer reflects the true and fair value of the investment.
Once this determination is made, a valuation must be conducted internally using the following principles:
conduct an earnings multiple analysis with appropriate comparable companies or transactions;
construct a Discounted Cash Flow model;
any other technique commonly accepted and used for that class of unlisted equity investment.
For Unlisted Debt, it often takes the form of loan investments made by a Fund, including those in related party special purpose vehicles.
Such debt investments will generally be valued at cost and the face value of the loan will be used as the book value.
However, a revaluation to the value of a loan may be required where an adverse credit event has occurred or seems likely.
Where a revaluation is required, the followings steps should be used as a guide:
The adverse credit event or default should be detailed in a file note, including how the impact on loan value has been calculated. This may involve assessment of the value of any underlying security.
Where the loan is still performing, a key tool in assessing value under such circumstances will be an assessment of the revised cash flows expected under the loan. This analysis may take the form of a Discounted Cash Flow model.
Where the loan is non-performing, the security available under the loan agreement should be considered. A Discounted Cash Flow model may be constructed to reflect the proceeds from the realisation of any underlying security, including the impact of costs and time involved in the realisation process.
In certain cases, where the directly held investment (or underlying investment) has a directly comparable listed counterpart, the Trustee may utilise the listed price of the listed comparable to value the asset in question.
Acquisition costs incurred overseas are calculated at the Australian dollar equivalent value based on the spot exchange rate at the time the expenses are paid as part of the buy/sell spread calculation.
The Trustee may also accept the valuation reports from independent expert valuers.
In all instances whereby a valuation is adopted, the Trustee will ensure that the following is considered and documented:
the reasons why a valuation was adopted;
what information has been relied upon in determining the valuation; and
what the key risks are to the valuation
7. Review of this Policy
This Policy will be reviewed by the Trustee at least every two years. The Trustee may also review this policy at any time for any reason, but in particular, where it becomes aware that:
this Policy is out of date;
this Policy is no longer relevant to the circumstances of the Trustee;
there are changes to the Trustee’s investment strategy;
there are changes to relevant standards;
there are changes to out-sourced service providers; or
there are reasons to believe that this Policy has failed or may fail to ensure the risk management of the valuation process.
BMYG Capital’s applied valuation policies are not limited to this Policy. Depend on the nature of fund type and/or underlying investments, the fund’s valuation method may vary from this Policy. Specific valuation policies about each fund may be outlined in the relevant disclosure documents of the fund.