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Frequent pricing of unlisted instruments

Hi there

I have been tasked to investigate the feasibility of generating regular ( monthly or more frequent) asset prices for unlisted equity instruments. I am aware that from a portfolio optimization and allocation perspective the returns generated from these frequent valuations would have to be de-lagged in order to determine the true risk of the assets for the purposes of portfolio formation.

I am perfectly fine with the valuation methodologies to be used.

Q:
I would like to know if there are any particular considerations I should make in my attempt to produce monthly price information. Also if there are any specific mechanisms used to generate frequent prices for unlisted equity instruments.
 
Is this for a risk management division? As in, a consultancy? Because if so, one thing will be to consider how you're going to get approval / signnoff on whatever valuation methodology you use.

Also, i'll a little unclear.. you're using the word "asset prices for unlisted equity instruments". Are you referring to an employee incentive scheme, in the nature of an option based on earnings or some sort of company performance measure?

Will you attempt, or even be able to, apply your practice to a LISTED company based on similar data availability and feigning ignorance of their share price/etc and then backtest the method's performanc against reality?

Sorry , but your question is still very vague, so thats about as much as I can suggest
 
Ok let me try to elaborate a little :

A portfolio manager who holds predominantly listed assets in his/her portfolio would like to make a direct investment in an unlisted company ( I presume it will be equity).

I don't know anything about their mandate at this point so i suppose they will be allowed to do this transaction.

So my task is to evaluate the possibility of providing frequent investment valuations. (which will obviously represent the fair value of the investment). I would therefore use normal company valuation techniques like Multiples etc...

So what I want to know is whether you have any experience with such a transaction and if so are there any particular issues I should look for ?
 
I've had similar tasks in my role, but to be honest each product/ valuation has required unique approaches and so there isn't really a " nice" answer to your question i think. Is suggest that ( in Australia at least), a serious consideration will be your qualifying/ industry certification... there are lots of rules around what products a particular professional can and cannot comment on. I think in my expertise you might want to look in peer- based valuations, ie find similar per companies ( same industry/ competitors etc) and you may be able to draw comparison that way.
Im a bit concerned by your " frequent" valuations required however, as from a personal view I think tournament take time and sort term valuations try for precision at the cost of accuracy
 
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