The net asset value (NAV) of the Kensington Private Equity Fund is calculated and published on the last business day of each month. The date of NAV publication is referred to as the “NAV Date”. Kensington determines the NAV according to the following guidelines.
VALUATION OF UNDERLYING INVESTMENTS
The Fund holds three types of investments: investments in private equity funds, direct investments in companies, and liquid investments.
INVESTMENTS IN PRIVATE EQUITY FUNDS
- Kensington receives formal quarterly reports from each of the private equity funds in which the Fund holds an investment. The value of the Fund’s investment in these private equity funds is reported in these quarterly reports. The reports typically arrive within 60 days of the end of the quarter (90 days at yearend), with different private equity funds reporting on different dates as their reports are completed. As soon as a quarterly report is received by Kensington, the reported value of the Fund’s investment in that private equity fund is reflected in the NAV on the next NAV Date.
- During the period between quarterly reports, Kensington may be advised of a sale of a portfolio company (or its securities) held within one of the private equity funds at a different price from the last reported value in that fund’s quarterly report. As soon as Kensington learns of the completion of any such transaction establishing a new value for the investment, the new net value of that investment to the Fund is reflected in the NAV on the next NAV Date.
- Kensington does not change the valuation of private equity fund investments based on anticipated transactions that are not yet completed, changes in company performance or any other factors unless and until such changes are reflected in a quarterly report received from the manager of the private equity fund.
- The value of a private equity fund investment used by Kensington in determining the NAV is always based on the most current information known to Kensington on the NAV Date. Kensington does not restate or recalculate any NAV based on subsequently learned information that occurred prior to the NAV Date or that was dated as of a time prior to the NAV Date if such information was unknown to Kensington on the NAV Date. For example, the receipt of a quarterly report 50 days after the end of the quarter would affect the next NAV calculation after receipt, but would not cause any recalculation of the NAV as of the quarter ended 50 days earlier.
DIRECT INVESTMENTS IN COMPANIES
- Direct investments in private companies are frequently completed as co-investments alongside other private equity funds. To determine the value of these investments, Kensington begins with the valuation of the company as reported in that fund’s most recent quarterly report received by Kensington prior to the NAV Date as a starting point for determining the value. Any new material information related to the company’s value is also taken into account so that the NAV is as current as possible. Kensington generally carries co-investments at the same value as is reported by the co-investing fund, and typically changes the valuation only where such new interim information is received.
- Direct investments may be completed without a co-investor. In these investments, Kensington confirms the value of the company at least quarterly, as part of the review of the company’s performance. Formal valuations are completed at least annually, which are confirmed by the Fund’s auditor. Material changes in value intra-quarter are reflected in the NAV on the NAV Date immediately following the documentation of the appropriate valuation revision.
- If there has been a transaction affecting the value of the company (such as a new third party financing, an IPO, or a sale of the company) between quarterly reports, Kensington will reflect the new valuation of the company in the calculation of the NAV on the next NAV Date after learning that such transaction has been completed. If there has been a material change in the performance of a portfolio company, Kensington may decide to write down or write up the value of the company in establishing the NAV on the next NAV Date following such change.
- Occasionally, the Fund may hold direct investments in publicly traded companies as a result of an IPO or other transaction. Direct investments in publicly traded companies are valued at their closing bid price on the last trading day prior to the NAV Date. Kensington may apply a discount to the public market price where contractual lock-up’s or other similar restrictions on trading exist, based on guidance received from the Fund’s co-investor in the company or from other parties in a position to assess the liquidity of the investment. Kensington does not intend to hold freely trading shares of publicly traded companies in the Fund, and will generally seek to sell those holdings in a timely and orderly manner when trading restrictions are removed.
- Direct investments may be held through partnerships or other specialized legal entities. Kensington considers an investment to be a “direct investment” rather than a “fund investment”, regardless of the legal structure in which it is held, if Kensington selects the investments in the specific business or company directly, rather than by indirectly selecting a fund manager with the discretion to select the ultimate investment.
Liquid Investments such as money market securities are valued at their quoted market price at the close of trading on the last trading day prior to the NAV Date. The Fund may use the original cost plus accrued interest as an approximation of market value for very short term liquid investments.
The Fund holds investments in various currencies and reports the NAV in Canadian dollars. In determining the NAV, Kensington uses the noon exchange rate quoted by the Bank of Canada on the last trading day prior to the NAV Date to determine the appropriate conversion rate.
FEES AND EXPENSES
Fees and expenses of the Fund that are known annual expenses (such as the cost of the Fund’s audit or a fixed management fee paid to an underlying private equity fund manager) are amortized or accrued through the calendar year, even though such fees and expenses may be paid quarterly or annually. The appropriate portion of such fees is deducted from the value of underlying investments in determining the NAV on each NAV Date. Fees and expenses that are not subject to such amortization are expensed as soon as they are incurred and deducted from the NAV on the next NAV Date.
NAV PER UNIT
The guidelines set out above establish a NAV for the Fund as a whole. This total is divided by the number of Units outstanding on the NAV Date to determine the NAV per Unit. The various classes of Units of the Fund carry different annual Management Fees and Performance Fees. The applicable Fees are deducted only from the relevant class of Units, with annual Management Fees being amortized through the year. In particular, the Service Fee payable to Investment Advisors whose clients hold Class A Units or Class E Units of the Fund is amortized and deducted from the value of such Units but not deducted from the value of the Class F Units or Class G Units, where no such fees are payable.
If Kensington were to discover any errors in the calculation of the NAV, these errors would be corrected on the next NAV Date occurring after Kensington learns of the error. Kensington would not restate the prior NAV to reflect the corrected information.
Kensington generally intends to apply this Valuation Policy to the calculation of the NAV on each NAV Date. However, as Manager of the Fund, Kensington reserves the right to amend this Valuation Policy from time to time in its sole discretion. Kensington may amend this Valuation Policy in response to new circumstances that may arise which were not contemplated when this Valuation Policy was established.
The Kensington Private Equity Fund is the successor to the Kensington Global Private Equity Fund, and was formed to acquire the entire investment portfolio in an internal reorganization completed on September 17, 2014. While these are different legal entities, each is a mutual fund trust with the same investment strategy executed by the same management team. Information on this website is therefore presented on a continuous basis from the formation of the Kensington Global Private Equity Fund in April 2007 through the reorganization into the Kensington Private Equity Fund to date.