casemark/preparing-fund-valuation-reports

Preparing Fund Valuation Reports

Structures fund NAV reporting with investment-level valuations, methodology disclosure, and fair value hierarchy classification.

When To Use

• Preparing quarterly or annual NAV statements for LP distribution
• Documenting valuation methodology for auditor or advisory committee review
• Classifying portfolio holdings across the ASC 820 / IFRS 13 fair value hierarchy
• Responding to LP requests for investment-level valuation detail
• Onboarding a new fund administrator and establishing valuation report templates

Inputs To Gather

• Portfolio schedule: Current holdings with cost basis, ownership percentage, investment date, and instrument type (equity, debt, convertible, warrant)
• Valuation data by investment: Most recent marks, comparable transaction multiples, DCF assumptions, or third-party appraisals
• Prior-period NAV report: Previous valuations for roll-forward and change commentary
• Fund terms: Management fee calculation basis, carried interest waterfall parameters, hurdle rate, catch-up provisions
• Fair value hierarchy classifications: Existing Level 1 / 2 / 3 designations and any reclassification events
• Valuation policy: Fund's adopted valuation policy, including frequency, governance approvals, and permitted methodologies
• Fee and expense data: Accrued management fees, fund expenses, organizational costs, and any fee offsets or waivers
• LP commitment schedule: Committed capital, called capital, unfunded commitments, and distributions to date per LP

Workflow

1. Validate source data — Reconcile the portfolio schedule against the general ledger. Confirm every holding has a current-period valuation input. Flag any investment missing a mark or carrying a stale valuation (>90 days without update) with [VERIFY].

2. Classify fair value hierarchy — Assign each investment to Level 1 (quoted prices in active markets), Level 2 (observable inputs such as comparable company multiples or recent transaction prices), or Level 3 (unobservable inputs such as DCF models or management estimates). Document the primary valuation technique and key inputs for each Level 3 holding.

3. Build the investment-level valuation table — For each holding, present:

   • Company/asset name, instrument type, and acquisition date
   • Cost basis and current fair value
   • Valuation methodology (market approach, income approach, or cost approach)
   • Key assumptions (e.g., revenue multiple of 8.2x applied to LTM revenue; discount rate of 12%)
   • Unrealized gain/loss and percentage change from prior period

4. Calculate fund-level NAV — Sum investment fair values, add cash and receivables, subtract accrued fees, expenses, and payables. Present the NAV roll-forward: beginning NAV → contributions → distributions → realized gains/losses → change in unrealized → expenses → ending NAV.

5. Prepare methodology disclosure — Draft a narrative section covering:

   • Valuation policy summary and governance (e.g., quarterly valuation committee approval)
   • Description of each methodology used and when it applies
   • Significant assumptions and sensitivity for material Level 3 positions
   • Any changes in methodology from prior period and rationale

6. Compute per-LP allocations — Apply the waterfall provisions from the LPA to allocate NAV across LP classes. Show each LP's share of NAV, unrealized carry accrual, and management fee charges. [VERIFY] waterfall mechanics against the specific LPA terms.

7. Draft the report package — Assemble into standard sections:

   • Executive summary with headline NAV, period-over-period change, and key drivers
   • Investment-level valuation schedule
   • Fair value hierarchy summary table (aggregate by level with percentage of total)
   • NAV roll-forward bridge
   • Methodology and assumptions disclosure
   • LP allocation schedule (if included in the distribution package)

Output

The final deliverable is a fund valuation report containing:

• NAV summary: Total fund NAV, NAV per unit/share, and comparison to prior period
• Investment schedule: Line-item valuations with methodology, key inputs, and fair value hierarchy level
• Fair value hierarchy table: Aggregate amounts at Level 1, 2, and 3 with transfers between levels noted
• Roll-forward bridge: Beginning-to-ending NAV reconciliation
• Methodology narrative: Plain-language disclosure of valuation approaches and material assumptions
• LP allocation table (where applicable): Per-LP NAV, carry accrual, and fee detail

Format as a structured report suitable for LP quarterly letters, advisory committee materials, or auditor work papers.

Quality Checks

• Every investment in the portfolio schedule appears in the valuation table — no orphaned or omitted positions
• Fair value hierarchy levels are consistent with the valuation inputs actually used (e.g., a DCF-only valuation must not be classified as Level 2)
• NAV roll-forward reconciles to the ending investment schedule total within rounding tolerance
• Management fee and expense accruals tie to the fund's fee terms and accounting records
• Prior-period comparisons use the same methodology unless a change is explicitly disclosed
• Sensitivity analysis is provided for any Level 3 position exceeding 10% of total NAV
• [VERIFY] compliance with ASC 820 / IFRS 13 disclosure requirements based on the fund's reporting framework
• [VERIFY] LP allocation waterfall against the governing LPA, side letters, and any fee arrangement modifications