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Thomas Chua asked 3 years ago

Hi Rusmin and Victor
For the case of Value Partners Group, would PE and/or P/CF be a good valuation choice given its cyclical nature?

Thomas Chua replied 3 years ago

Also, would you advice to remove performance fee as an extraordinary item? It is very much dependent on the market performance on a year to year basis.

Management fees 2017:1,196,044 2016:1,049,068
Performance fees 2017:2,570,921 2016:10,802
Front-end fees 2017:338,985 2016: 338,734

2 Answers
Victor Chng answered 3 years ago

Hi thomas,
 
Performance fee is part of their business so cannot discount it. I think the ideal valuation for them is PB or percentage of asset under management (AUM). Fund with good track record should commend at least 5% of AUM while fund with bad track record should have valuation of 3% of AUM.

Thomas Chua replied 3 years ago

Thanks for the advise Victor. May i trouble you to further elaborate on % of AUM? Do we measure the net profit as a % against the AUM or its revenue?

Victor Chng answered 3 years ago

In the fund management industry, when they want to sell their fund away to another manager. They will sell in term of % of AUM. For instance, I am running a $100 million fund with a 1% management fee yearly. Today I decided to sell my fund to someone to manage. If I have a good track record someone may offer me at 5% of AUM which means $5m (5% of $100m).
If my track record is bad, the person may offer 3% of AUM. Do note that sometime, good track record can be purchase at higher percentage up to 9% of AUM.

Thomas Chua replied 3 years ago

I see, thank you for the clear explanation and generous sharing :)

Victor Chng replied 3 years ago

welcome :)