The International Organization of Securities Commissions (IOSCO) published today its Final Report on Valuing Collective Investment Schemes (CIS), which sets out a comprehensive and updated set of recommendations to further enhance the reliability, consistency and transparency of valuation practices across global investment funds.
The report updates and consolidates IOSCO’s earlier Principles on valuation for collective investment schemes and hedge funds respectively. It takes into consideration feedback from market participants and developments in financial markets such as the rise in funds investing in less liquid, harder-to-value assets, including private assets, and the increasing participation of retail investors in such funds.
Accurate valuation of fund assets is critical to investor protection and to maintaining confidence in financial markets. It underpins the calculation of net asset value (NAV), ensuring that investors subscribe and redeem units at fair prices and are treated equitably.
The report sets out a series of recommendations aimed at strengthening valuation practices across jurisdictions and market participants. These focus on:
- Robust governance and oversight arrangement, including under stressed market conditions;
- Management of conflicts of interest;
- Sound and consistently applied valuation methodologies;
- Appropriate use and oversight of third-party valuation providers; and
- Transparency, disclosure to investors and record-keeping.
The recommendations are designed to be proportionate and adaptable across different types of funds and jurisdictions, while promoting a more harmonized and a more globally consistent framework for fund valuations.
“Reliable valuation practices are fundamental to fair and efficient markets. IOSCO’s updated recommendations will further ensure that investors are treated fairly and that fund valuations remain robust, including in periods of market stress.”
- Jean-Paul Servais, IOSCO Board Chair
“This work reflects IOSCO’s continued focus on strengthening the resilience of the asset management sector. The recommendations provide comprehensive practical guidance to address potential valuation challenges arising from the growing investment in less liquid assets and growing use of more complex investment strategies. They also complement IOSCO’s broader commitment to fortifying the resilience of open-ended funds to support financial stability.”
- Jessica Reyes, Chair of IOSCO’s Committee on Investment Management, and Head of Asset Management Policy Division at the French Autorité des Marchés Financiers (AMF)
