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Financial statements 2011
EIF has developed a set of tools to design, monitor and
manage port folio of PE funds. This set of tools is based
on an internal process and model, the Grading-based
Economic Model (“GEM”), which allows EIF to systemati-
cally and consistently assess and verify funds’ operational
quality, valuations and expected performances. This effort
supported by the development of a proprietary Information
Technology (IT) system and by an integrated software (front
to back) improves the investment decision process and the
management of portfolio’s financial and liquidity risks.
EIF’s internal grading methodology allows RMM PE to
determine the monitoring coverage and intensity, as well
as the range for the expected performance. Twice a year
each fund is benchmarked against industry statistics and
significant deviations between the benchmarking and the
expected performance grades are investigated.
The grades are defined as follows:
Expected performance grade
P - A
The fund’s performance is expected to fall into the first quartile of the benchmark.
P - B
The fund’s performance is expected to fall into the second quartile of the benchmark.
P - C
The fund’s performance is expected to fall into the third quartile of the benchmark.
P - D
The fund’s performance is expected to fall into the fourth quartile of the benchmark.
Operational status grade
O - A
No adverse signals so far.
O - B
Some adverse signals, but not expected to have a material impact on the fund’s valuation.
O - C
Adverse signals; without changes/improvements likely to lead to a material impact on the fund’s valuation.
O - D
Critical events that had a material adverse impact on the fund’s valuation.
3.2.2 Portfolio overview
At the end of 2011, total PE own risk investments in
terms of net commitments (i.e. commitments made to un-
derlying funds minus capital repayments) amounted to
EUR 406.4 m (2010: EUR 388.9 m).
EIF maintains a balanced portfolio with a focus on technol-
ogy-oriented early-stage and general mid- and later-stage
funds. EIF does not directly acquire participations in com-
panies, but instead invests in selected PE funds, with private
sector investors providing at least 50 % of the capital. All
investments are made on a pari passu basis with other inves-
tors, granting them no specific rights (or obligations) to EIF.
All of EIF’s risk stemming from its own-risk PE operations
is fully covered by shareholders’ equity. As a sub-ceiling,
PE net commitments may not exceed 50 % of equity, ex-
cluding fair value reserve, equivalent to EUR 1 030.9 m
(2010: EUR 1 046.8 m). Hence, the EUR 406.4 m of
net commitments at year end 2011 (2010: EUR 388.9 m)
was below the EUR 515.5 m limit (2010: EUR 522.0 m).
Of the EUR 536.5 m of own- risk funds commit ted at
year end 2011 (2010: EUR 490.5 m), EUR 363.2 m
had been disbursed (including equalisation fees) against
EUR 321.0 m as at 31 December 2010.
PE investments are valued quarterly according to the in-
dustry valuation guidelines. Using the methodology de-
scribed in note 3.2.1, EIF records value adjustments on
a line by line basis, either through the profit or loss in the
case of impairment or through equity. Consequently, net
disbursed own-risk funds (at cost and using the closing
exchange rates prevailing at the reporting date of the fi-
nancial statements) of EUR 233.2 m (2010: EUR 219.4 m)
are valued at EUR 212.2 m in EIF’s 2011 statement of
financial position (2010: EUR 194.4 m).