The Limitations Of The Securities Investment Fund Valuation Method Applied To The Private Equity Fund And Innovative Research

Private equity fund is a bridge grafting financial and industrial, realized the function of financial services for the real economy, in order to impel the economic development of countries. But behind the expansion of private equity fund, also gradually shows its liquidity risks, a growing number of LP requires a channel that can provide the liquidity, then the private equity secondary market arises at the historic moment. The trading of the share of the private equity fund depends on a good pricing system. Now the biggest reason for the further development of China’s private equity secondary market is the difficulty of the valuation and pricing, so this paper want to do some research in PE fund evaluation. This study mainly answers two questions:Firstly, can securities investment fund valuation method simply is used in the private equity valuation? Secondly, how to evaluate the price of private equity fund, and what are the key points?For the first question, this article thinks that because of the investments, organization and the operation mechanism, the securities investment fund evaluation methods can’t simply be used in the private equity valuations after analyzing the securities investment fund valuation methods and the investment and financing mechanism of the private equity. Its limitations mainly embodied in two aspects: Firstly, from a valuation framework level, the net asset value (NAV) can only reflect the fair value of the investment portfolio of PE funds, and didn’t reflect the "real" economic value of PE funds; Secondly, from the portfolio level, the valuation method for the underlying assets of the securities investment fund does not apply to private equity fund’s underlying assets. For the second question, in this paper, on the basis of solving the problem of the first and the experience of domestic and foreign private equity valuations, we build a value evaluation model suitable for the interests of private equity fund in our country and put forward three key factors of the model, which are the investment portfolio of PE funds, the assessment of PE funds and the combination of both.