# IPEV Valuation Guidelines

The **IPEV Valuation Guidelines** (published by the International Private Equity and Venture Capital Valuation Board) are the standard framework used by private equity and venture capital fund managers to determine the [fair value](/reporting-and-metrics/fair-value.md) of portfolio investments. They are referenced by ILPA, most LP due-diligence questionnaires, and by IFRS 13 / ASC 820 as a recognised valuation methodology for private fund assets.

The current edition is December 2022. Gildi's valuation workflows implement this edition.

## Scope

The guidelines apply to all portfolio investments in a closed-end private fund where there is no active market price — which covers virtually all PE and VC portfolio companies. They do not apply to investments in publicly-traded securities (where market price is the fair value) or to fund-of-fund investments (which follow the underlying fund's NAV).

## The Valuation Hierarchy

IPEV defines a hierarchy of techniques, ordered from most to least reliable. GPs must use the most appropriate technique for each position and period:

| Technique                    | When to use                                                      |
| ---------------------------- | ---------------------------------------------------------------- |
| Price of recent investment   | Within \~12 months of an arm's-length round                      |
| EV / Earnings multiple       | Mature companies with positive EBITDA                            |
| EV / Revenue multiple        | Growth-stage companies pre-profit                                |
| Discounted cash flow         | Infrastructure, long-duration assets, complex capital structures |
| Industry-specific benchmarks | Financial services, real estate, holding companies               |
| Net asset value              | Holding companies or asset-heavy businesses                      |

Changes in technique between periods require disclosure and justification in the valuation memo.

## Key Principles

**Calibration.** When a new investment is made, the technique is calibrated so that it exactly reproduces the transaction price. This calibrated model (multiple, discount rate) is then used in subsequent periods and adjusted only for observable changes in comparables or company fundamentals.

**Orderly transaction.** Fair value assumes an orderly transaction — not a distressed sale or forced liquidation. If market conditions are disorderly, GPs must use judgment to adjust for that.

**Measurement date.** Fair values must be measured at the reporting date (typically quarter-end or year-end). Using stale inputs from earlier in the quarter is not acceptable.

**Independence.** The IPEV Guidelines recommend that valuation decisions be reviewed by a party independent of the investment team. Most funds implement this through a valuation committee with at least one independent member.

## GP Obligations

GPs using IPEV must:

1. Document the technique and inputs for each position mark.
2. Maintain consistency in technique between periods (changes require justification).
3. Have valuations reviewed by a valuation committee.
4. Present annual valuations to external auditors.
5. Disclose the valuation methodology to LPs in the fund's annual report.

## How Gildi Implements IPEV

Gildi's fair value module requires GPs to select a technique for each position and record the key inputs. The system enforces technique consistency between periods — if a GP selects a different technique from the prior quarter, a mandatory justification field must be completed before the mark can be saved. The full audit trail (technique, inputs, comparable set, committee signoff, auditor confirmation) is stored per mark and is available for download in the annual report package.


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