Seeking Outside Help With Alternative Investment Valuation

16 June 2021
 Categories: Finance & Money, Blog

Any financial statements you have will be examined thoroughly by stakeholders and regulators. For this reason, you will want to make sure that you are working with a financial reporting valuation service that will make sure that you are in compliance with reporting requirements. This is especially important with alternative investments.

Value Estimates

Your value estimates will need to be fully supported by market patterns and by valuation approaches that are considered appropriate for your business. If the auditors and regulators dispute the valuation, a financial reporting valuation service will speak with the regulators and will support their conclusion. 

Alternative Investments

You may hold your assets in alternative investments outside of stocks, bonds, and cash. These can include:

  • Real estate
  • Antiques
  • Art
  • Commodities
  • Private equity or venture capital
  • Hedge funds
  • Managed futures
  • Derivatives contracts

If you are holding any of these types of investments, you will want to speak with alternative investment valuation specialists. These types of investments are not traditionally registered to the SEC and are considered to be more illiquid. 

Why Alternative Assets Are More Illiquid

If you will need to sell an alternative asset, you may find it more difficult to do so. For example, if you have invested in a rare antique, you must find a suitable buyer before you will be able to convert the asset into cash. 

When an asset is considered very illiquid, it can be much more difficult to value. Therefore, you will need help from alternative investment valuation experts. For various reasons, these assets can also see significant swings in value.

Alternative Investments and the SEC

While alternative investments do not have to be registered with the SEC, they are examined by this regulatory body. Therefore, you should not expect there to be the same regulatory protections as ETFs and mutual funds.

You will need to perform due diligence to be able to determine if an investment is worthwhile and you will also need to be considered an accredited investor. 

Why You May Benefit from Alternative Investment Valuation

Alternative investments are considered to be more complex and come with a greater amount of risk. You will also be working with less verifiable performance data and there will be fewer opportunities advertised to you. These investments also are more expensive to enter into but can perform much better when in the right hands. You may be able to grow your wealth rapidly and minimize your exposure to risk.