Managing FX risk; guidance on March marks

Deaglo’s founder outlines a one-day risk management strategy for PE firms; IPEV issues guidance on March valuations; even the big players are feeling the pressure on management fees.

Currency risk: For those of you with currency risk, we have this contributed article from FX solutions provider Deaglo. The firm’s founder gives us a “one-day risk management strategy for PE firms,” including some step-by-step instructions on how to calculate your value-at-risk (VAR).

March marks: In case you missed it, the International Private Equity and Venture Capital Valuation Guidelines provided guidance for your March 31 marks, with sections for equity and debt investments, as well as LP interests. I reported in “Mark to What?” (still among the site’s recent top-reads) that one CFO I spoke to said the firm is likely to report March marks late in the cycle. That still bears up – both CFOs and others in market I’ve spoken to say it will take extra time to prepare March marks, given there are still so many unknowns. But IPEV recommends that GPs get their fair valuations for first quarter to LPs in as “timely” a manner “as possible”.

Management fees: Even the top players in the PE industry are feeling the pressure on management fees. In this article from our April issue, Isobel Markham looks at research from law firm Paul Weiss that shows management fees for most PE funds are now in the 1.5-1.75 percent range – before blended fees and other discounts. The firm also discovered some other interesting trends on discounts offered, preferred return, subscription lines and more.

Email prepared by Graham Bippart