An article discussing how inflated Net Asset Values (NAVs) in infrastructure funds are creating challenges in secondary transactions references research and commentary from EDHEC Infra & Private Assets:

“Research from EDHEC Infrastructure and Private Assets Research Institute (EIPA) says accepted methodologies used by third-party accounting firms “backward looking” and “unrealistic.”

“Until something blows up, until the banks take control, GPs keep inflated valuations. It’s very stale,” explains EIPA director Tim Whittaker.” (…)

(…) “While it is better to have a third party that’s independent to be able to validate NAVs, the complexity associated with these assets is used as an excuse for them to not actually interrogate the cashflows or produce their own cashflow model,” he says.” (…)

(…) “The regulatory impacts on NAV measurement are going to become a lot more stringent,” Whittaker notes. “This is going to cause some heat within these PE funds. They’re pushing towards it.” (…)

Read the full article.